Oracle: Enterprise Manager Update And Valuations

| About: Oracle Corporation (ORCL)

Oracle (NASDAQ:ORCL) announced that it released Oracle Enterprise Manager 12c Release 3; the application updates existing software. There are updates that include, but are not limited to, improvements of Oracle Exadata Database Machine and Oracle Exalytics. The updates are bullish for the valuations of Oracle.

But it may take some time before enterprises upgrade to the new application. Consequently, Oracle's revenue may not be significantly impacted by the update until calendar 2014 to 2016. Typically, software providers tend to be ahead of customer demand as the applications can't be fully utilized with the current technology.

This paper will cover some of the facts related to the release of the new Enterprise Manager and Oracle's valuations.

That said, I remain long-term bullish on shares of Oracle, but there could be some short-term bumps in the road stemming from the decline in hardware revenue.

Enterprise Manager 12c Release 3

Oracle is releasing Oracle Enterprise Manager 12c Release 3 with enhancements for managing infrastructure, middleware, and applications. The application allows IT service providers to be more agile while further reducing the costs and complexity of their cloud and enterprise IT environments. The release is now available for download.

Oracle Enterprise Manager 12c has helped private and public cloud service providers deliver cloud services up to ten times faster while helping them free up administration resources. In addition, Oracle announced enhancements to the Oracle Enterprise Manager Extensibility Exchange and Oracle PartnerNetwork ecosystem for Oracle Enterprise Manager.

Oracle will host a webcast on July 18, 2013 to provide more information about Oracle Enterprise Manager 12c R3.

The capability improvements are:

  • Richer management for cloud and engineered systems;
  • expanded middleware and application management capabilities;
  • expanded ecosystem; and
  • efficiency gains through enhancements to the underlying management framework.

The Oracle Exadata Database Machine management has been simplified; now, administrators can easily scale from managing a single Oracle Exadata machine to racks of multiple machines. Improvements to Exadata are critical to Oracle maintaining its competitive advantage.

Also, there are new management capabilities for Oracle Exalytics that support both virtual and physical deployments. The consolidation planner tool has extended to support Oracle Exalogic Elastic Cloud. Additionally, an enhanced management console allows from managing Oracle WebLogic Server, Oracle GlassFish Server, and Oracle Tuxedo from a single pane; the changes enhance and simplify the user experience.

The enhancements to Oracle CRM provide better database diagnostics and configuration compliance for Siebel environments. Siebel and offerings from (NYSE:CRM) are CRM solutions. International Business Machines (NYSE:IBM) and Oracle teamed up to provide CRM solutions.

Oracle's valuations declined substantially in recent weeks.


Valuation is a critical component of equity analysis. I use the multiplier model valuations to value common equity shares. The model is employed in a variety of ways; there are comparisons to the five-year average valuations. Also, there are comparisons to the S&P 500 valuations. Lastly, there are the time series valuations. The combination gives a clearer picture of the relative valuation of the common equity shares.

Oracle S&P 500 Oracle 5y Avg.
Price/Earnings 13.3 16.6 18.2
Price/Book 3.1 2.3 3.9
Price/Sales 3.9 1.5 4.5
Price/Cash Flow 10.3 9.9 13.3
Dividend Yield % 0.4 2.2

Relative to its recent trading history, Oracle is undervalued. With regard to the S&P 500, Oracle is overvalued, but this industry tends to trade at a premium to the market. Lastly, relative to its five-year averages, Oracle is undervalued.

Based on the valuations, Oracle could have considerable upside. On the other hand, the growth rate has slowed; thus, Oracle could command a lower price multiple. That said, the long-term prospects remain favorable as the company continues to have a wide economic moat. Additionally, the residual income approach suggests Oracle should create shareholder wealth.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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