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Oracle (NASDAQ:ORCL) Looks to the Cloud

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The software giant is struggling to gain traction in the hardware business. But its innovative new products and an improving US economy should give it a boost.

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According to the Institute of International Finance, corporations in the US, the eurozone, the UK, and Japan are now sitting on a record $7.75 trillion in cash and short-term investments. That's an obvious negative for IT investments right now, but it points to strong potential for a wave of spending on new computers, servers, and software once corporate managers feel the economy is returning to a more solid footing.

Meanwhile, there is rising optimism surrounding the prospects for Exadata and other new products that Oracle is developing. Analyst Trip Chowdhry of Global Equities Research is among those who feels that the company is on the right track. In a recent Businessweek.com article, he said: "What investors need to focus on is, are they losing market share?... Our answer is 'no.' And is their research and development pipeline strong? Yes."

Big Potential in Cloud Computing

The company is also looking to cloud computing for growth. Under a cloud computing model, businesses access data and software on remote servers, either directly or over the Internet.

Here again, Oracle feels its integrated approach-offering both software and hardware infrastructure-gives it an edge over IBM and SAP AG (NYSE:SAP), which focus on hardware and software, respectively.

Cloud computing does pose some challenges for Oracle, however. For example, it could lower the number of internal hardware companies need to run their businesses. In addition, cloud applications are often sold on a subscription or metered basis instead of an upfront license sale. Such a transition would lower Oracle's initial sales but would provide more predictable revenue streams.
No positions in stocks mentioned.
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