Oracle Corporation (ORCL) was chosen by Bank of Lao PDR, central bank of Lao People’s Democratic Republic, for the modernization of its banking operations.
Oracle’s FLEXCUBE Universal Banking will be implemented by Bank of Lao PDR to manage the administrative aspects of its core banking system. The Oracle FLEXICUBE Universal Banking will be installed as the platform for processing of transactions, managing accounts and maintaining customer information centrally.
The application is also expected to perform loan processing and credit control functions and also help in the depository functions related to the securities and bond market.
Oracle has been chosen as the technology solutions provider by several central banks in Asia, such as the National Bank of Cambodia and the State Bank of Vietnam.
Oracle has been gaining traction as a technological solutions provider for financial institutions and its partnerships with several central banks have put Oracle in a position to serve 400 banks across 125 countries.
We believe Oracle will continue to build an innovative product pipeline. According to research firm Gartner, Worldwide IT spending is predicted to total $3.6 trillion in 2011, a 5.1% increase from 2010. Computing hardware and enterprise software are expected to be faster growing segments, with a growth rate of around 7.5% year over year, respectively.
We believe Oracle will benefit from this trend, as it remains well positioned with Sun hardware and Oracle software.
Currently, less than 10.0% of global IT spend is devoted to cloud computing. According to market research firm In-Stat, businesses in the United States will spend more than $13 billion on cloud computing by 2014. Oracle, through its Exadata and Exalogic product lines, provides the infrastructure for companies to move toward cloud computing, where data is handled remotely in datacenters rather than on premises.
Oracle is collaborating with Amazon.com’s (AMZN) Amazon Web Services (“AWS”) to promote its cloud computing offerings. Customers can build enterprise-grade solutions hosted by Amazon Web Services (AWS) using database and middleware software by Oracle, and also launch entire enterprise software stacks from Oracle on Elastic Cloud Compute (Amazon EC2). This improves scalability, reliability and cost-effectiveness.
We expect this partnership to help Oracle increase penetration in the cloud computing market as AWS has significant market share of more than 45.0%. We believe Oracle’s customer base will improve going forward, based on strong customer demand for both Exalogic and Exadata.
However, Oracle is expected to face strong competition from Hewlett Packard Co. (HPQ), International Business Machines Corp. (IBM), Cisco Systems Inc. (CSCO) and Red Hat Inc. (RHT) in the cloud-computing market that may hurt its profitability over the long term.
We maintain a long-term (6–12 months) Outperform rating on Oracle shares. Currently, Oracle has a Zacks #2 Rank, which implies a Buy rating on a short-term basis.
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