Is Oracle Corporation (ORCL) Just Another Cash Cow?

Oracle has also inked a similar nine-year cloud computing partnership with its bitter rival salesforce.com, inc. (NYSE:CRM) in which the two firms will integrate their clouds. Oracle has emerged on top with this deal as Salesforce.com will buy Oracle’s hardware and software for nine years. Additionally, Salesforce.com has repeatedly played down Oracle’s cloud computing technology in the past, calling it “false cloud;” with the new deal, however, it appears that Salesforce.com has not only given its approval to Oracle Corporation (NASDAQ:ORCL)’s technology but has also embraced it. However, I believe that through this deal, Salesforce.com can increase its customer base. Due to the integration of the services of Oracle and Salesforce.com, the latter’s products will become easily accessible to former’s customers and potential customers. Nonetheless, while we are hoping for the best for salesforce.com, inc. (NYSE:CRM), the deal is a sure-fire win only for Oracle.

My foolish take

I believe that the current deals have come out of necessity as the changing business environment has forced Oracle to embrace cloud computing, something that Oracle CEO Larry Elison called “nonsensical” just a few years ago.

With the current dip in its price, Oracle is a good value play. It is now cheaper than Microsoft, trading at 10.5 times the current year and 9.6 times next year’s profit estimates. It also generates a healthy return on equity of 24.5%. With sluggish growth, little dividend and intense competition, however, Oracle Corporation (NASDAQ:ORCL) is just another cash cow — i.e it is not for those who are looking to invest for the long haul in a company with high growth prospects.

The article Is Oracle Just Another Cash Cow? originally appeared on Fool.com and is written by Sarfaraz Khan.

Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool recommends Salesforce.com. The Motley Fool owns shares of Microsoft and Oracle. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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