Though they're hardly alone in making a business transition away from legacy hardware and enterprise software solutions to cloud software-as-a-service (SaaS), data analytics, and related offerings, IBM (NYSE:IBM) and Oracle (NYSE:ORCL) have each bet their respective futures on the success of their transformations.

Oracle was late to the cloud party but is quickly making up for lost time with each successive quarter's sky-rocketing growth. IBM, on the other hand, has been all-in on delivering cloud services since CEO Ginni Rometty implemented its "strategic imperatives," which include burgeoning markets such as cognitive computing, analytics, and data security.

The question of which is the better buy, IBM or Oracle, isn't a slam-dunk either way, but one company does have the edge.

Picture of Oracle employees with its logo.

Image source: Oracle.

The case for Oracle

It almost laughable now, but investors may recall a few years ago co-founder and then-CEO Larry Ellison's infamous aversion to the cloud. But as co-CEO Safra Catz put it, "On an annualized non-GAAP basis, our total cloud business has reached the $5 billion mark, and our SaaS and PaaS businesses grew at the astonishing rate of 85% in

Oracle's combined SaaS and platform-as-a-service (PaaS) revenue jumped 73% to $1 billion last quarter. Including cloud infrastructure sales -- which rose a modest 17% to $178 million -- total revenue for Ellison's now favorite business was $1.19 billion. Not bad considering Oracle tossed its hat in the ring late in the game.

As positive as Oracle's cloud sales have been, investors should take comments in context, like co-CEO Mark Hurd's assertion that, "we sold more new SaaS and PaaS than and we're growing more than 3 times faster." Oracle's all-important cloud revenue is growing faster than's, and IBM's for that matter, but that's because it's earlier in the growth phase than its competitors.

Futuristic image of IBM's cloud.

Image source: IBM.

The case for IBM

To hear the typical Oracle-speak, IBM and its cloud-related efforts are a thing of the past. However, with an annual run-rate of $14.6 billion as of last quarter, IBM is near the top of the cloud-related sales heap. Better still, it's not just IBM's top-line cloud revenue that's so impressive, it's where the sales are coming from that bodes well for the future.

According to a recent study, public cloud offerings will generate over $142 billion in revenue this year after removing ad sales from the mix. The largest opportunities are in business processes -- which falls right into IBM's cognitive computing wheelhouse -- and SaaS, which is expected to account for a whopping $46.33 billion.

Of IBM's $14.6 billion in annual cloud revenue, $8.6 billion came from SaaS sales, which was a 59% increase year over year. A stellar $7.8 billion of IBM's $18.2 billion in total revenue last quarter was derived from its strategic imperatives group, equal to 43% of sales. IBM's 3% drop in total sales to $18.2 billion in the first quarter has driven its stock down 10% since it shared the news on April 18.

And the better buy is...

Despite the exaggerated statements coming from Oracle, it really is making significant strides in its transition efforts to cloud software. With earnings scheduled for June 21, investors can expect more of the same in terms of continued hyper-growth as Oracle gains traction. Oracle's 1.7% dividend yield and relative value -- it's trading at 17.5 times forward earnings -- both work in its favor.

For investors in search of real value, though, few tech industry stocks are as inexpensive as IBM. At a meager 11 times forward earnings and a price-to-sale ratio of 1.8, which is little more than a third of Oracle's, IBM's status as an out-of-favor stock makes it a value investor's dream. Toss in its 3.9% dividend yield and multiple unlimited growth prospects, and IBM gets the nod.