salesforce.com, inc. (CRM), SAP AG (ADR) (SAP), Oracle Corporation (ORCL): Who Should You Choose?

Oracle Corporation (NASDAQ:ORCL): Flat operating margin offsets decline in revenue

Oracle Corporation (NASDAQ:ORCL) is one of the largest database and enterprise software providers. After its acquisition of Sun Microsystems, the company started selling hardware products and services.

The company’s third-quarter results were disappointing, as low performance from the sales department left many deals incomplete. As a result, revenue dropped 1% to $8.97 billion. Hardware systems products dropped 22% as customers postponed their purchases after Oracle Corporation (NASDAQ:ORCL) announced new products will be released in the upcoming months.

Operating margin was same from last year at 44.7%, and since operating expenses remained flat, the decline in revenue was compensated. The company expects to expand its margins through cost savings, such as reducing the number of products and adopting a build-to-order model. I believe this reduction needs to be correctly analyzed, since Oracle Corporation (NASDAQ:ORCL)’s diversified product pipeline makes it more competitive against Salesforce.com and SAP.

Bottom line

Even though the industry’s prospects seem bright, increasing competition and the rise in operational costs puts a cap on the margins of its major players.

salesforce.com, inc. (NYSE:CRM) still leads the SaaS CRM sector, but this status could change as technology changes rapidly. Most of the efforts come down to investing in marketing and R&D. The continuous contraction in its operating margin could lead salesforce.com, inc. (NYSE:CRM) to reduce these investments.

SAP AG (ADR) (NYSE:SAP) and Oracle Corporation (NASDAQ:ORCL)’s efforts to build their position through aggressive acquisitions has filled their balance sheets with intangible assets and goodwill. Not all acquisitions might perform as the companies expect, and this could affect their valuation.

The article A Review of the CRM Market originally appeared on Fool.com and is written by Damian Illia.

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