As we have seen during the past few years, a variety of tech giants have
imploded notable examples include Nokia (NYSE: NOK ) and Research In Motion
(NASDAQ: RIMM ). So it always is amazing to see a long-time tech giant that
finds a way to grow and make shareholders happy. One case is Oracle (NASDAQ:
ORCL ), which has produced an average annual return of 9.82% for the past
decade. And yes, the momentum has not stopped. In the latest quarter, Oracle
posted net income of $1.8 billion, or 36 cents per share, up from $1.4 billion,
or 27 cents per share. Revenues increased by 12% to $8.4 billion. On the
earnings news, the stock spiked by 6.5%, but then it fizzled because of the
falloff in the equities market. So is there an investment opportunity? To see,
here's a look at the pros and cons: Pros Must-have products. Unless you are a
tech guru, you probably never have used or seen Oracle's software. But you
certainly have benefited from the technology. The company is a leader in core
systems like databases, servers and corporate applications. Such technologies
are likely to remain essential for many years to come. Strong leadership .
Oracle CEO Larry Ellison is a legend. Besides understanding the key trends in
the global software industry, he also has been savvy at building strong teams.
Keep in mind that some of his prior executives have gone on to create stellar
companies like Salesforce.com (NYSE: CRM ) and Quest Software (NASDAQ: QSFT ).
Hardware. Oracle is becoming a player in this market. To this end, the company
has made key acquisitions, such as for Sun Microsystems. ORCL also has made
aggressive investments with internal development. While hardware has lower
margins, the business still is vital for future growth. The fact is hardware is
an efficient way to help companies with areas like high-end storage, processing
and security. And it looks like Oracle will get lots of traction from its
Exadata and Exalogic offerings. Cons New innovations. While Oracle has
tremendous lock-in with its customers, this can easily deteriorate. After all,
there are emerging new technologies, especially in the cloud-computing industry.
At the same time, Oracle's licensing and maintenance fees are substantial
which could motivate customers to look for alternatives. Mergers and
acquisitions. This has been a key strategy for Oracle's growth. However, it
definitely can be risky and result in too much complexity. Just look at the case
with Cisco (NASDAQ: CSCO ). Competition. Of course, Oracle must fight with many
tech giants, such as SAP (NYSE: SAP ), IBM (NYSE: IBM ) and Hewlett-Packard
(NYSE: HPQ ). But smaller companies like Salesforce.com also are making an
impact. Verdict Since 2005, Oracle has purchased more than 65 companies. While
the dealmaking has not been perfect, it certainly has made the company much more
competitive. And even as the software market matures, there is likely to be
continued growth. After all, in a highly competitive global marketplace,
companies need ways to be more nimble, and software is a smart way to do this.
Besides, it looks like Oracle has more room to find more efficiencies in its own
organization, which should mean even higher margins. When looking at all these
factors, the pros outweigh the cons on the stock. Tom Taulli is the author of
"All About Short Selling" and "All About Commodities." You can also find
him at Twitter account @ttaulli. He does not own a position in any of the stocks
named here.
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