Java Slowly Killing Oracle Momentum

Sep. 7.12 | About: Oracle Corporation (ORCL)

If you bought Oracle (NYSE:ORCL) last October at its high of $33.66, hope you enjoyed the 18 cents you got later in dividends. The stock has been rallying since May but now stands at $32,50, still short of that earlier figure.

Why? While the Oracle database business is rolling along, despite a lot of cloud talk (some of it from Oracle) it's becoming increasingly evident that the purchase of Sun Microsystems was a huge mistake.

The hardware business continues to lag the industry, and the big open source projects obtained in the deal - OpenOffice, mySQL, and Java - have not delivered either. OpenOffice was practically let go, and while mySQL has done all right on the bottom line Java has become a huge problem since Oracle made it more proprietary.

Oracle is having to drop support from the software, and security problems found in April have only recently been patched. PC World notes that the software is quietly being abandoned by some customers. Even after the patches to Java 7 have gone out, security experts are telling clients to disable the software wherever possible.

This is a huge black eye for Oracle, because control of Java was an important part of its control over the future direction of computing. Oracle remains a huge presence in the enterprise space, and while quarterly revenues are up about 30% from a year ago, with net income nearly doubling, the Java problems are preventing shareholders from getting a solid price for their success.

Qineqt is right. Based solely on finances Oracle should be due for a 30% pop. But based on headlines that is not going to happen, and with widely-held stocks like this - 4.88 billion shares are outstanding and institutions own just 62% - headlines matter.

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.