salesforce.com, inc. (CRM), Oracle Corporation (ORCL): Taking Clients to the Clouds

Investor perspective

Both Oracle Corporation (NASDAQ:ORCL) and International Business Machines Corp. (NYSE:IBM) pay a modest dividend near 2% and have a long history of earnings, whereas salesforce.com, inc. (NYSE:CRM) sees continual revenue growth, but is struggling to contain expenses at the same time. Since the beginning of 2012, Oracle has purchased 6 cloud computing companies, while rival IBM acquired 5. Both of these tech titans are able to then take those acquired software offerings and scale them up using their vast sales distribution networks.

salesforce.com, inc. (NYSE:CRM) reported a loss of $319 million on revenues of $3.28 billion, whereas Oracle Corporation (NASDAQ:ORCL) earned $5.1 billion on $37.1 billion in revenue. Oracle has a market cap of $142 billion, while Salesforce is richly valued at nearly $22 billion, even without showing a profit. Oracle Corporation (NASDAQ:ORCL) and International Business Machines Corp. (NYSE:IBM) are quickly moving into the cloud computing space, while offering traditional customized software options to large organizations. Only time will tell if David will be able to fend of the Goliaths.

Foolish bottom line

salesforce.com, inc. (NYSE:CRM)’s lack of profitability in its race to drive revenue and grab market share is long term oriented, however the lack of profit is keeping me on the sidelines. Both IBM and Oracle Corporation (NASDAQ:ORCL) pay modest dividends and have large clients with recuring revenue and a track record of profitability. Conservative investors would be better suited with the old guard tech companies that are large enough to swallow up cloud computing companies to compete in this space.

Wes Patoka owns shares of IBM. The Motley Fool recommends Salesforce.com. The Motley Fool owns shares of International Business Machines. and Oracle.. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Taking Clients to the Clouds originally appeared on Fool.com is written by Wes Patoka.

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