Oracle Corporation (ORCL), SAP AG (ADR) (SAP): Should You Hit the Panic Button on This Stock?

Times are a-changin’

The IT industry is currently going through a transition period, with more and more companies opting for cloud-based computing. Oracle, being a relative newcomer in the arena, is obviously facing tough competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN), SAP AG (ADR) (NYSE:SAP), and salesforce.com, inc. (NYSE:CRM).

SAP AG (ADR) (NYSE:SAP), one of Oracle Corporation (NASDAQ:ORCL)’s biggest competitors, already has a huge market share in cloud computing, and aims to raise $2.6 billion in revenue from it by 2015. The company has recently launched ‘SAP 360 Customer’, which aims to combine various different technologies. Coupled with its database technology offering HANA, this will definitely boost its market share further. In fact, the company expects to see a rise of 14%-20% in revenue from cloud subscriptions for the full year 2013.

This could mean tougher times for Oracle, a company which is known for its high profit margins. In the face of tough competition, the company may be forced to offer its solutions at lower prices, in exchange for a greater market share.

Don’t you worry child..

Investors in Oracle do not have much to worry about, though. For one, Oracle Corporation (NASDAQ:ORCL) has plans to expand its cloud computing line in the coming quarters. It aims to align its high-tech hardware department with its software applications and databases, such that it becomes a one-stop shop for everything related to cloud computing.

Secondly, the company has a solid traditional customer base, most of whom are still loyal to the brand. Lastly, its new hardware offerings may finally bring about a turnaround in its declining hardware sales, given that they are all cutting edge. With revenue for the upcoming year poised to grow about 6%, a few acquisitions may be all it takes to rev up this tech giant.

The article Should You Hit the Panic Button on This Stock? originally appeared on Fool.com and is written by Sonam Chamaria.

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