Oracle Corporation (NYSE:ORCL) made headlines this week with an announcement at Oracle CloudWorld, although it received mixed reactions. At first glance, the news was significant. Oracle is making a serious run on cloud computing with expected data center expansions.
Per the press release:
“With this expansion, Oracle will have doubled the regional presence of its cloud platform in the last 24 months, with 29 Regions available globally. Additional Regions are planned to come online in APAC, North America, and the Middle East through mid-2018.”
At the same time, many pointed out that Oracle is already lagging in the cloud race. At last year’s event, Oracle founder and CTO Larry Ellison “set his sights squarely on Amazon,” as CRN put it. But, the company is far from Amazon.com, Inc. (NASDAQ:AMZN).
Consider this summary of the announcement from The Register:
“Oracle claims to be a ‘global large scale cloud platform’ but much of its cloud revenue has come from Software-as-a-Service rather than platform.”
Or this from CIO Dive:
“Oracle wants to compete with the other cloud leaders, but it is a bit late to the game.”
Is There Good News for Oracle Stock Investors?
The company doesn’t have to win the race for its moves to pay off. While we often talk about markets like cloud computing in terms of competition, the reality is that growth leaves plenty of the pie for anyone. Besides, Oracle’s wide footprint is the real appeal of the tech behemoth. In fact, CIO Dive added, “However if it draws on its customer base, which is often loyal to Oracle products, it could help many companies move to the cloud.”
Indeed, Oracle has already netted huge cloud accounts from PepsiCo, Inc. (NYSE:PEP), General Electric Company (NYSE:GE) and T-Mobile US Inc (NASDAQ:TMUS). If you want to pit Oracle and Amazon against each other in a one-on-one race, there are things to consider besides sheer speed to the cloud. From an investment standpoint, for one, investors are rewarded for loyalty to Oracle stock with a sweet dividend.
Oracle instituted a 15-cent dividend last year, which yields 1.5% at current prices — not too shabby in the face of a 17% run in the last year. Meanwhile, a 28% payout ratio and solid cash pile leaves plenty of room for a bump. Amazon, on the other hand, is far from even considering paying a dividend. As investors are aware, AMZN is more the R&D type.
The point is, even though Oracle was a bit late to the cloud race, it’s still a player, and that’s what matters. The company’s recent announcement shows its head is in the right place. The tech giant may not be moving as fast as some rivals, but it’s still a solid place for your money.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
