Good News For ORCL, BMC, LLNW: Goldman Turns Bullish On Software

Goldman Sachs analyst Sarah Friar turned bullish on the enterprise software sector Friday morning, adding Oracle (ORCL) to the firm’s Conviction Buy List, and upgrading her ratings on BMC Software (BMC) and Limelight Networks (LLNW). She also removed Citrix (CTXS) from the Conviction Buy List.

The sector calls was based on three factors, she writes:

Second quarter results from software confirm better than expected North American software spending.

Software tends to outperform in the second half.

She expects buyback and M&A activity to persist “and potentially intensify” heading into year-end.

On Oracle, she writes that the company’s ongoing consolidation strategy has provided a large product set, “resulting in greater account control and tremendous cross-selling opportunities.” She says that given an outlook for 20% earnings growth “some degree of multiple expansion is warranted.” Friar writes that the near-term pipeline is strong, and says upside to August quarter estimates is “likely.”

On Citrix, she says that Goldman keeps a Buy rating, but that “the stock’s strong move in recent months leaves less upside to our price target than previously.”

As for BMC, which goes to Buy from Neutral, she writes that “business remains healthy despite some fears of a soft quarter.” Friar says the company’s stock should benefit from rising EPS and cash flow numbers through the year. Writes Friar:

We expect the company to continue to buy back shares at a robust clip, and note that the stock is the single cheapest in our coverage group on cash flow-based metrics.

She also raised her rating on Limelight to Buy from Neutral. “Recent weakness surrounding a soft June quarter is overdone,” she writes. Friar says the stock offers “an attractive opportunity at current levels given Limelight’s impressive growth prospects.”

ORCL vs. BMC vs. LLNW 1-yr chart:

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[Long-Short Guy:]

Related:
<blockquote>
<b>Oracle Releases New Database, Adds Security Features</b>

July 11 (Bloomberg) -- Oracle Corp. released the new version of its database software, adding security features and support for multimedia files to its biggest-selling and most-profitable product.

The program, called 11g, is being introduced at an event today in New York. The new version lets customers track changes made to databases and encrypt data, Redwood City, California- based Oracle said today in a PR Newswire statement.

Oracle makes about two-thirds of its software sales from databases and related programs, and is counting on the new features to encourage clients to upgrade...
</blockquote>

Source:
www.bloomberg.com/apps...;sid=atQXphEMvTzQ

2007 Jul 22 10:04 AM