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Oracle Corporation (ORCL) and NetSuite Inc (N) Team Up Against International Business Machines Corp. (IBM)

Some of the biggest trends in companies right now are the growth of earnings through the use of strategic partnerships. At least that’s what Oracle Corporation (NASDAQ:ORCL) and NetSuite Inc (NYSE:N) are up to. In this strategic alliance, both Oracle and NetSuite will increase their capabilities to serve medium-sized businesses.

Partnerships an emerging trend

Source: PricewaterhouseCoopers

In 2013, 22% of global CEOs believed that mergers and acquisitions, joint ventures, or strategic alliances would be their companies’ primary growth drivers. Based on the survey result, investors should look closely at this joint venture between Oracle Corporation (NASDAQ:ORCL) and NetSuite Inc (NYSE:N).

Oracle Corporation (NASDAQ:ORCL)

The alliance between the two companies is intended to increase the competitive advantage for its customers. The purpose is to integrate both human resources and finance systems within an organization. To be more specific, it would connect the financials, sales, services, and fulfillment information for a business. This way the company in question can better address all of its internal needs and have better control through the use of software. The hoped-for outcome is that by providing an all-in-one software solution to businesses, the two combined companies will be able to steal market share away from International Business Machines Corp. (NYSE:IBM).

How to position

The new developments are certainly likely to put pressure on International Business Machines Corp. (NYSE:IBM) as all three companies are becoming increasingly dependent on software and services in order to generate revenue growth. Analysts on a consensus basis anticipate Oracle to grow its sales by 4.90% in 2013 and 5.2% in 2014. This sluggish sales growth is why Oracle Corporation (NASDAQ:ORCL) is pursuing a partnership with NetSuite.

NetSuite Inc (NYSE:N), on the other hand, is projected to grow its sales by 32% in 2013 and 27.40% in 2014. To be fair, NetSuite is a much smaller company so the cloud, cloud integration, and partnerships like these will have a more favorable impact on the smaller company. NetSuite currently has a $6.8 billion market capitalization and could be in the sweet spot for growth-oriented investors. The company is projected to grow its earnings by 28.20% per year over the next five years. Assuming that’s correct, NetSuite Inc (NYSE:N) could be a compelling investment opportunity.

What about IBM?

Don’t worry about International Business Machines Corp. (NYSE:IBM), though, it has a wide array of services. I would try listing all of them, but I figure I’d just screenshot the page.

Source: IBM

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