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The world’s largest software maker Microsoft Corp. (MSFT - Analyst Report) and Oracle Corp. (ORCL - Analyst Report) entered into a strategic partnership enabling customers to run Oracle software on Windows Server Hyper-V and Windows Azure. Financial aspects of the deal were not disclosed by either party.

Through this partnership, Oracle will support its software which includes Java, Oracle Database and Oracle WebLogic Server on Microsoft’s Windows Server Hyper-V and Windows Azure. On the other hand, Microsoft will offer Oracle’s software to its Windows Azure customers. Further, Oracle will make its Linux software available to Microsoft’s cloud computing customers.

The hybrid cloud offering will provide more choice and flexibility to customers. Now both the tech giants will be able to provide solutions for Oracle applications, middleware and databases. The partnership will allow both the tech giants to compete effectively with local cloud-based software providers.

Windows Azure is Microsoft’s cloud computing platform for building, deploying and managing applications and services through a global network of managed datacenters. Windows Azure core offerings include Media Services, Mobile Services, Cloud Services, Virtual Machines, Websites and Big Data. It competes with Amazon's (AMZN - Analyst Report) cloud computing platform Amazon Web Services (AWS) and OpSource Cloud Computing Services.

According to Gartner, the public cloud market may jump 18.5% to $131.0 billion in 2017 from $111 billion in 2012. Microsoft, with its solid portfolio and this partnership with Oracle should be able to tap this opportunity.

The company is expanding Windows Azure internationally, which represents a significant investment in the company's cloud strategy. The cloud market looks attractive and given the slump in the PC market and its struggle on the desktop and mobile fronts, it is important for the company to increase focus on emerging segments such as mobile hardware and the cloud.

Microsoft remains one of the best positioned software vendors, given its wide range of products, emerging markets strength, continued technology deployment at data centers and growth in cloud computing. We believe that Microsoft’s current investments are supported by its strong balance sheet and expect these to drive the next growth phase, improving prospects of market share gains.

Microsoft reported revenues, excluding deferrals, of $21.46 billion in the second quarter of fiscal 2013, up 34.0% sequentially and 2.7% from last year, in line with our estimates. All except the Entertainment & Devices segment grew both sequentially and from the year-ago quarter.

Currently, Microsoft has a Zacks Rank #3 (Hold). Another technology stock that has been performing well is Yahoo Inc. (YHOO - Analyst Report) carrying a Zacks Rank #2 (Buy).

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