Oracle (ORCL): Gearing Up To Take On Amazon's AWS - UBS
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UBS analyst Brent Thill, reiterated his Buy rating on shares of Oracle (NYSE: ORCL) after the company completely reversed its strategic view on IaaS and PaaS, clearly aiming at Amazon's (NASDAQ: AMZN) AWS dominance. Its much awaited, expanded slate of such Cloud infra offerings inherently competes with its entrenched, margin-rich on-premise portfolio, however, this is the right strategic manoeuvre to protect the core, even if it is painful at the outset.
The analyst is positive on ORCL's:
1) robustness of core tech; 2) ability to deliver a truly hybrid vision
2)hindsight-driven innovation advantage
3) deepening Cloud infra engineering, exec bench
4) captive, 300K large on-prem database audience
However, the analyst also questions if ORCL can navigate this transition in a profitable way (a key reason it initially steered clear), considering the structural low-margin / price competitive market dynamics, ORCL's small current scale (IaaS/PaaS run-rate ARR bookings $400M vs. AWS ~$12B run-rate revs), and the capex lead hyperscale players AWS, MSFT, GOOG have already achieved ($11B, $20B, $28B respectively in last 3yrs, vs. ORCL's $3B).
No change to the price target of $44.00
Shares of Oracle closed at $39.51 yesterday.
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