Oracle Joins the Cloud Space Acquisition Spree: What's to Come?

(Continued from Prior Part)

Oracle’s scale in the software space

Earlier in this series, we discussed Oracle’s (ORCL) recently announced acquisitions in the cloud space. In this part, we’ll compare the value proposition of the company and other software companies in the United States.

As of May 4, 2016, and as the above chart shows, Microsoft (MSFT) was the world’s largest software player by market capitalization. It was followed by Oracle. Red Hat (RHT), ServiceNow (NOW), and Tableau Software (DATA) are some other leading players in the systems software space.

Oracle’s valuation multiples

Let’s look at Oracle’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. We’ll also look at other US software players’ multiples.

Oracle was trading at a forward EV-to-EBITDA multiple of ~9.1x on May 4, 2016. This metric was lower than Microsoft’s multiple of ~9.3x. Red Hat’s and ServiceNow’s multiples stood at ~16.3x and 29.1x, respectively.

Oracle’s dividend yield

Oracle’s forward annual dividend yield was ~3.5% on May 4, 2016. This was higher than Microsoft’s forward dividend yield of ~2.7% on May 3, 2016. ServiceNow and Tableau Software don’t pay dividends.

Investors who want to gain exposure to Oracle could consider investing in the Technology Select Sector SPDR ETF (XLK). While XLK invests ~3% of its holdings in Oracle, it also has a 31% exposure to application software. In the final part of our series, we’ll see what kind of recommendations analysts are giving for Oracle.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - A Look at Solair, Microsoft’s Latest Acquisition

• Part 2 - Why Is Microsoft Targeting the Internet of Things Space?

• Part 3 - Opower Is Oracle’s Latest Cloud Buyout: Will It Be of Benefit?