What to invest in, Oracle or Cisco Systems?
Oracle and Cisco have been for the longest time giants in the IT industry. With the growth of cloud computing, however, we have seen the decline in both companies’ use, and they lost. Most cloud computing used the third-party IT infrastructure, which meant there was no demand for Oracle and cisco solutions.
We have seen the trajectory change, and the coronavirus pandemic has brought about uncertainty. But how much has the pandemic affected the economy? Which is the better investment option?
CISCO
Looking at the CISCO financial year that ended in July, it shows a challenging time for the company. Under the infrastructure of the company, the business of computer network hardware faced difficulties in the USA. The coronavirus just compounded the existing problems caused by the trade war between China and the US in 2019.
The issues that the company faced saw it face a 15% decline on the year in year out revenue in their third quarter. It was a significant loss for the company as the decline was $6.4 billion of the total revenue of $12 billion in that third quarter.
Despite the division, the company has had to evolve to minimize its reliance on its business model. Slowly by slowly, the company is moving from hardware business to software business. It is growing a subscription-based income to help the Software-as-a-service model (SaaS). It has proved to bring a steady income stream. The structure has been working, and the revenue has grown over the last three years. 74% of the revenue from the software business came from software subscriptions. It is an increase from 65%.
Despite the pandemic, the cisco business has remained healthy. The total margin has risen from 63.1% to 64.9% in Q4. The operational budget declined by 6%, and their investments rose from $27.1 billion to $28.6 billion. These milestones have given Cisco the ability to survive the economic slowdown caused by the pandemic.
Oracle
Unlike its counterpart cisco, which moved into the software business, Oracle transitioned to cloud computing. Oracle now offers cloud products, with a database. It uses Artificial Intelligence to manage and deploy databases. It makes Oracle different than other competitors.
In the last quarter that ended on 31st May, Oracle returned to a database option that is on-premises by enabling cloud database technology that’s run in a customer-owned data center. This capability is essential for the largest clients of Oracle in the government and financial sectors, and this needs data security of a high degree.
Looking at this, this does not mean that this has changed the impact. The results in Q4 shows a decline of 6% over the years. The pandemic had affected revenue adversely in many companies, but looking at Oracle, their revenue growth before the pandemic was still modest.
70% revenue of the company in 2020 got accounted for in the license support segment and the cloud services of Oracle. It got experienced over the last three years but at a gradual pace.
Gartner’s expectations have it that the market of cloud computing will grow from $242 billion to $364 billion in 2022. When you look at Oracle, it is competing with big companies like Amazon for customers. This competition has made capturing outsized sales challenging for Oracle. But Oracle has managed to hold its own by looking at the company’s modest growth.
Looking at the financial health of Oracle, it seems excellent. Going through this pandemic will not be an issue for Oracle.
Conclusion
Looking at the two companies, Oracle successfully transitioned to cloud computing for its solutions. Though its growth is modest, it has managed to maintain financial health. Looking at Cisco, on the other hand, has managed to transition from its software solutions to software as a service model. Looking at its revenue, we have seen that it has made progress before the pandemic. And looking to the future, Cisco is looking forward to roll-out 5g networks and IoT to help get demand for its products.
