Oracle Corp. (ORCL) is the largest enterprise software company and currently has about 50% of its revenues in a fully recurrent mode, selling updates on current software licenses it installs and selling a significant among of product-support services at highly profitable and recurring levels, making it part of the investment portfolio of said Jean-Baptiste Nadal, Managing Director & Lead Portfolio Manager-Global and International at Metropolitan West Capital Management, LLC.
“The company is the market leader in the database market with 50% share, a market with high barriers of entry and extremely high barriers of exit for the clients. Indeed, once Oracle’s products are installed on a client’s system, it’s very difficult to displace them and for the client to switch to another vendor,” Nadal said.
Nadal says enterprise software is among the fastest growing in the technology sector, and he expects ORCL to maintain its position of leadership in enterprise software for the foreseeable future, and the stock is currently near the top in terms of percentage of his portfolio holdings.
“From a catalyst standpoint, we think that the company will continue to broaden its product portfolio in part through bold acquisitions, so to become the vendor of choice for most corporations. Therefore, we believe that the competitive position of the company is actually strengthening and its ability to generate strong cash flow over a long period of time is pretty much intact,” Nadal said.
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