Cramer: The 4 Tech Horsemen Ride Again

 | Mar 16, 2017 | 2:02 PM EDT
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Now it's Oracle's  (ORCL) turn to be re-rated. It's Oracle's turn to be recognized as a changed company that is accelerating its business in the cloud and migrating its existing customers while taking away customers from other companies in a pretty aggressive fashion.

Oracle's been trying to get into the cloud in a big way, because so many of its customers want to gravitate to it, as a cheaper and better way to store data. Oracle has a fabulous, lucrative on-premises licensing business that's been a huge cash generator, but it has been working like a demon to defend its turf from cloud interlopers.

It didn't matter though, because the old licensing business was declining faster than the new cloud business. Until this quarter -- when two things happened: The dollar growth of its cloud business was twice the decline in new licensing business and the gross margin for that platform as a service and software as a service recurring revenue increased from the previous quarter.

That's how Oracle engineered an earnings beat while at the same time started taking some share from old opponent SAP (SAP) and new opponent Amazon (AMZN)  -- because Oracle is offering a pretty good web service of its own for migrating customers. It was a remarkable quarter for co-CEOs Safra Catz and Mark Hurd and chairman and founder Larry Ellison, and they are to be congratulated for that and the big 27% increase in the dividend. Oracle has more than $50 billion overseas, so if the country ever embraces repatriation, there'd be still one more reason to buy this relatively cheap stock for its new growth rate.

Oracle joins Intel (INTC) which, earlier this week bought Mobileye for $15 billion to boost its business in autonomous driving vehicles, which I think is the largest frontier left in tech. While some analysts downgraded the stock on this move, I think CEO Brian Krzanich reinvented the perception of the company as a data processor -- autonomous cars are massive data hogs -- and no longer a personal computer chip maker. Unlike Oracle, the stock didn't go higher because Brian's thinking long term about how he can dominate a business that will have maybe $100 billion in total addressable market in just a few years.

As someone who drove recently in a Waymo, Alphabet's (GOOGL) self-driving vehicle, I can tell you that unless you have done so, you may be missing the point of the Mobileye purchase. I think it's brilliant -- and, like Oracle's move to the cloud, will raise the price-to-earnings multiple portfolio managers will pay for the stock.

Their two moves are entirely reminiscent of the remaking of Cisco (CSCO)  from a plain oil hardware business connected to the net to a soup-to-nuts software analytics and cybersecurity company that can be a one stop shop for an enterprise with gigantic internet needs. I think Cisco, under Chuck Robbins is about as aggressive a company as I have ever seen in the Valley, and Robbins' success with his cybersecurity offerings is disrupting the entire industry -- and could be a reason why Palo Alto Networks (PANW) didn't hit its numbers. Chuck had to make these moves as his switching and routing business, like Intel's P.C. business and Oracle's software licensing business, had ceased to grow and these companies had been left behind.

It's Satya Nadella up at Microsoft (MSFT) though, that was first in reinvention. Remarkably, Microsoft, once so dominant in tech, missed social, missed mobile and had missed the cloud until it went all-in with its Azure product line, which is now a substantial part of its business -- so big that it moves the needle. It's actually a viable competitor to Amazon when it comes to web services, and that's simply because Nadella decided it had to happen, or else.

Oracle, Cisco, Intel and Microsoft, the old four horsemen of the tech apocalypse are coming back. They had all slipped up. But they always preserved their balance sheets, they always recruited smart people and they always were competitive. They're back and they're buys.

 

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