Oracle Corporation (ORCL) Offers Decent Value

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Oracle (ORCL)Oracle Corporation (NASDAQ:ORCL) is one of the few large cap companies that have solid earnings as well as great growth prospects. Oracle’s business is strongly protected against competition due to high customer switching costs. It’s very difficult for a customer to leave Oracle and go to a competitor. As a result, Oracle has stable and highly predictable recurring revenue.

That being said, Oracle’s performance in the stock market hasn’t been remarkable in the past several quarters. Oracle is essentially a debt free company, with $33.7 billion of cash and short-term investments against only $18.5 billion of debt. This results to approximately $15 billion of surplus cash, or $3 per share.

I feel that Oracle’s stock is preparing itself for a mild uptrend in 2013. In this article, while I focus on the positive catalysts for the stock, I also address the near-term concerns for the company.

Oracle: The big brother in cloud computing

Oracle Corporation (NASDAQ:ORCL)’s cloud solutions serve large corporations who rely on its products to run critical business operations. Providing reliability, security and privacy are Oracle’s top priorities for its clients. Oracle’s Software-as-a-Service (SaaS) for large corporations are very capable of addressing such primary concerns.

Since Oracle’s products have very high switching costs, as I mentioned above, migrating away from the company requires extensive planning and testing, including running both Oracle and new systems in parallel for an extended period of time. I feel this is a huge competitive advantage for Oracle.

Oracle’s large customer base

Oracle has 390,000 customers around the globe, and serves all of the top Fortune 100 companies. Such an economic moat is built on its wide SaaS model, and Oracle is expanding it through both R&D and acquisitions.

But now Oracle is facing serious problems in serving cloud SaaS, and a majority of IT execs are already considering leaving Oracle. However, the battle has just begun and Oracle is massively updating its software and revamping its SaaS business model to retain customers.

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