Oracle CorporationORCL

Morningstar Rating

Stock Research and Analysis

by Rafael Garcia

Oracle has astutely leveraged its dominance of the database software industry to become a major provider of enterprise software solutions. We believe that the firm has the scale, resources, and expertise to remain at the forefront of the consolidation of the enterprise software industry. Read more

Bulls Say

Oracle is the top provider of database software. Research firm IDC estimates that Oracle commands 43% of the database market, followed by distant-second IBM's DB2 with 21%, and Microsoft's MSFT SQL Server with 19% in third place.

Oracle's free cash-flow margin (free cash flow divided by revenues) has steadily improved to 32% in fiscal 2008 from 17% in 1999.

Oracle's revenue growth and operating profits highlight management's impressive track record of successfully identifying, buying, and integrating smaller software companies. Read more

Bears Say

TomorrowNow, a now-defunct unit of archrival SAP, and other small IT companies, provide cheaper support for Oracle's software products, putting pressure on the firm's maintenance revenues.

Open-source databases, such as MySQL and PostgreSQL, which small companies have been keen to deploy, pose a threat to Oracle's dominance of the database market.

Although the overall growth of the database market is slowing down, several small providers of specialized database applications are growing at a fast pace. Read more

Strategy

Oracle provides a wide portfolio of enterprise software solutions (database, middleware, and applications) designed to solve the full range of IT requirements of its customers. By offering a broad variety of tightly integrated and straightforward-to-deploy products, the firm aims to reduce the complexity and costs of enterprise IT implementations, which in turn, Oracle expects will spur demand for additional solutions and services. Read more

Management

Co-founder Lawrence Ellison has been CEO of Oracle since the company was established in 1977. He is the architect behind the firm's transformation into an enterprise software powerhouse. Overall, we believe that Oracle has a talented and experienced management team. Read more

Profile

Oracle sells a wide range of enterprise software solutions, including databases, middleware, and applications. Software license updates and product support, the most profitable segment of its operations, account for 46% of total revenues. Read more

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