Oracle: What You Need To Know Now

  • July 14, 2005
  • Melanie Hollands




Oracle’s results
for
fiscal fourth quarter, 2005….Well
the database business is strong but applications appear to continue to suck
wind. Interestingly, none of the analysts on the conference call got management
to fess up on the apps revenues on an “apples-to-apples” basis.

 

A very quick (and
to my mind correct) calculation is to add back the maintenance revenues to its
pro-forma numbers. But PeopleSoft did about $90 million to $100 million in the
comparable period last year. Meaning the $350 million it reported for apps
this fourth quarter is relative to $320 million to $330 million last year pro
forma. Not robust at all – particularly when you begin to wonder if the
PeopleSoft guys who were left were squeezing their books to get their payout and
leave.

 

Listening to Larry
bloviating about how (con)Fusion is PeopleSoft / JD Edwards / Oracle apps being
rebuilt on a common Java platform leaves me wondering if the same sort of lack
of understanding of people factors that plagued Oracle apps is about to be
repeated. We’ll see…

 

Oracle’s apps
business is an 8% to 10% grower (apples-to-apples) on the license line from here
on out with the acquisitions. Tech spending in the U.S. and Europe may be
growing a couple of percent faster than GDP. Like Microsoft, who is Oracle
gaining market share from anymore? So it’s still just a GDP-plus business, not a
growth business.

 

More acquisitions
like ProfitLogic aren’t make much of a difference. If Oracle makes another
biggie – which one would make sense? Lawson? Not anytime soon.

 

At what point do
owners of Oracle licenses begin to get ticked off at the maintenance
they’re paying? Not anytime soon, to be sure; but there is a potential wind-down
of revenue growth to “GDP minus something”.

 

The PeopleSoft
merger integration is over. The next task: making an app that everyone wants to
migrate to is the big question. How’s that going? Who knows?  

 

Would I own ORCL?
The stock is not expensive and the company could start using the cash to shrink
the capitalization and pay a dividend. Current Street expectations are really
pretty realistic.

 

But are there
better things to invest in? Absolutely.

 

What are they? Not
software. I see very little compelling out there in the enterprise and
applications sub-sectors of the software world. I’d go somewhere else — in tech
(maybe DELL) or, even better, outside of tech for now.

 

Technically,
however, ORCL looks like a long: If it can hold this consolidation level — $13
to $13.6* — and close above $13.7 on volume of around 30  to 40 million,
then it has an upside shot of $15 beans.

Melanie Hollands

melaniehollands@yahoo.com

 

Editor’s
Note:

Melanie sent this article to me at the beginning of the week and the stock was
trading here. My apologies for not getting it up earlier.

Brice

 


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