There are 3 articles on this stock available only to PRO subscribers.
- Oracle's business model - part pacemaker manufacturer, part disposable razor company - is a fine tuned engine, operating at peak performance.
- Elevated operational leverage in Oracle's most important segment continues to indicate the Sun acquisition was a good move for company shareholders.
- The crux of an investment in Oracle boils down to how well the company transitions to middle age.
- An Oracle acquisition of Salesforce.com could happen.
- An intrinsic value estimate differs from a price target.
- An intrinsic value estimate calculates what shares are worth on the basis of a discounted free cash flow stream.
- A price target is simply an opinion of an analyst as to where shares might trade at some point in the future, sometimes based on non-firm-specific noise.
- Let's calculate a fair value estimate for Oracle in this article.
- I looked through every company in the S&P 500 to see if there were any companies that have had increasing free cash flow every year.
- I found that only 3 companies out of the whole S&P 500 have increased free cash flow each of the last 10 years.
- Out of 3 companies Oracle was the only dividend payer, and is the company I will focus on in this article. In part 2 I will cover the non-dividend payers.
Oracle Changing Things Up: Potential Buying Opportunity Opens For Investors
- Larry Ellison announced plans to retire as CEO of Oracle and will assume CTO and chairman duties; the shift brings two exceptional leaders in his stead.
- Recent results for Oracle were mixed: the firm missed estimates for earnings and revenues slightly, however, bookings in the critical cloud sector rose by 54%.
- Oracle stock is up YTD, and the firm pays a steady dividend.
- We suggest investors consider taking a position in Oracle as new leadership and strategy begins to play out.
- ORCL is suitable for Enterprising Investors but not Defensive Investors following the ModernGraham approach.
- According to the ModernGraham valuation model, the company is undervalued at the present time.
- The market is implying 3.66% earnings growth over the next 7-10 years.
Update: Oracle Earnings Suggest That The Selloff Is Overdone
- Oracle reported revenue and operating income growth of 3% for Q1 of FY15.
- Solid progress in the cloud SAAS and PAAS businesses, with growth of 32%, while IAAS revenue grew 26%.
- The company remains a wide-moat, moderately undervalued business.
Oracle: Weak Hardware, New License Sales Dim Earnings As Management Changes LoomTrefis • Fri, Sep. 19
- Oracle's quarterly earnings per share stood at $0.62, at the lower end of its quarterly guidance and lower than analyst estimates of $0.64.
- Oracle's cloud sales grew 31% to reach $475 million, compared to $363 million in Q1FY14.
- Fiscal first quarter sales for new licenses stood at $1.37 billion, 2% lower than its fiscal Q1 2014 sales of $1.4 billion.
The End Of The Great Oracle-SAP Database War And What Comes Next
- CEO Larry Ellison's retirement ends an era at Oracle.
- It has been beating SAP but is being beaten in the cloud.
- New co-CEO Mark Hurd has to find a way to buy Salesforce.com or Oracle is going down.
Oracle: Ellison's Departure Is The Focus, But The Performance Was Soft
- Larry Ellison is stepping down as CEO but remains involved.
- This news overshadows a soft quarter and soft outlook.
- I continue to like shares amidst share repurchases, a strong balance sheet and fair valuation.
- Yet I am only willing to pay a 15 times multiple given the continued growth struggles.
2 Reasons Why Oracle Might Finally Start Growing Faster
- Oracle's acquisition of Micros Systems and its small but flourishing SaaS and PaaS subscription businesses are positives for the company.
- Slow growth has been the leading concern among investors.
- In order to keep up with expectations Oracle will need to the hit the gas on its growth by reporting at least 65 cents per share in profits and $8.804 billion in sales.
- The whisper number is $0.64, in-line with the analysts' estimate.
- Oracle has a 61% positive surprise history (having topped the whisper in 37 of the 61 earnings reports for which we have data).
- The overall average price move is 'as expected' (beat the whisper number and see strength, miss and see weakness) when the company reports earnings.
This Ratio Could Hold The Key To Higher Returns For Oracle
- In this article we’re focusing on Oracle’s significant cash pile.
- Specifically, we believe that the company could increase its dividend payout ratio.
- As a result, shares in Oracle could move higher over the medium term.
- Oracle Corporation (ORCL) is slated to report 1Q 2015 earnings after the bell on Thursday, September 18th.
- Non-GAAP Earnings Per Share (EPS): Company guidance is $0.62 to $0.66 (from their conference call). The Street estimate is $0.64 (range $0.61 to $0.66).
- New Software Licenses and Cloud Software Subscriptions Revenues: Analysts expect 2.0% y/y to $1.426 bln.
Oracle Earnings Preview: Fairly Valued, Is Oracle Now Secular Mid-Single-Digit Grower?
- Dividend payout and dollars should increase as % of free-cash-flow.
- More share repurchases being used to absorb insider sales.
- I wonder if ORCL now a cash-cow with mid-single-digit secular growth ?
- Oracle has been on an acquisition spree over the last 10 years, spending more than $50 billion to acquire 100 companies.
- Many investors will probably think of Oracle’s Sun Microsystems acquisition as the biggest question mark concerning the company’s acquisition strategy.
- Its MICROS and TOA acquisitions are likely to become accretive to revenue and earnings in the current fiscal year. The real benefits, however, are likely to be felt 2-3 years.
- Oracle has been trying to get a larger market share in the CRM segment as this area is showing rapid growth.
- SaaS, PaaS and IaaS software revenues are growing at impressive rates for the company.
- Despite impressive revenue growth in these areas, Oracle is still behind the industry average of over 50% and the growth potential is massive.
- Cloud infrastructure, IaaS and PaaS software businesses have now reached over $12 billion in annual revenues.
Oracle Corporation, Taleo Corp. - M&A Call (Transcript)Apr. 26, 2012
Oracle Corporation - Shareholder/Analyst CallOct. 12, 2011
Oracle Corporation - Shareholder/Analyst CallOct. 6, 2011
Wed, Oct. 22, 1:22 PM
- Enterprise software vendors are having a rough day after VMware (VMW -5.6%) provided light Q4 guidance to go with a Q3 beat.
- On its CC (transcript), VMware also reported its bookings fell Q/Q in Q3. They were hurt by Russian and German softness, and a failure to close a major enterprise license agreement (ELA) with a federal client. ELAs made up 29% of Q3 bookings, down from 37% in Q2.
- Rivals Oracle (ORCL -1.5%), Red Hat (RHT -3.3%), and Citrix (CTXS -1.5%) are among the decliners, as are Splunk (SPLK -4.7%), Tableau (DATA -2.8%), Qlik (QLIK -2.5%), and MicroStrategy (MSTR -0.9%). Oracle provided light guidance last month.
- Several enterprise cloud software stocks are also selling off: N -2.5%. VEEV -2.9%. ZEN -4.2%. CSOD -2.3%. SAAS -3.2%. NOW -1.7%.
- Nomura and Raymond James have downgraded VMware. Nomura thinks 2015 guidance (expected in January) will also be light, and believes slow vSphere server virtualization growth (affected by competition and high penetration rates) will remain a headwind, given it's still over half of VMware's business. "Growth has to come from the vCloud Suite ... other newer products are just too small still to matter."
- Some of those "other newer products" are doing well: VMware's end-user computing license bookings (boosted by the AirWatch acquisition) rose over 60% Y/Y in Q3, and its much-hyped NSX software-defined networking platform now has 250+ paying customers (up from just 100 a few months ago).
- A slew of enterprise tech names sold off on Monday in response to IBM's Q3 report. Big Blue's software sales fell 2% Y/Y in Q3, after rising 1% in Q2. CA, Citrix, and ServiceNow report after the bell.
Mon, Oct. 20, 9:19 AM
- IBM missed Q3 estimates, pulled its $20 2015 EPS forecast, and respectively reported 15% and 7% Y/Y drops in hardware revenue and services backlog.
- Big Blue also stated it "saw a marked slowdown in September in client buying behavior," and declared its numbers "also point to the unprecedented pace of change in our industry" (at least partially a reference to cloud services adoption).
- SAP missed Q3 revenue estimates (while posting in-line EPS), reported a 3% Y/Y drop in traditional software license revenue, and (citing the cloud transition) cut its full-year op. profit outlook.
- Microsoft (NASDAQ:MSFT) -0.8% premarket. H-P (NYSE:HPQ) -2% premarket. Oracle (NYSE:ORCL) -1.8%. EMC -0.8%. There's a good chance other enterprise IT names will trade lower as well.
Wed, Oct. 1, 10:20 AM
- New Oracle (ORCL -0.3%) co-CEO Safra Catz: "We’re No. 1 in database, we’re No. 1 in middleware, but we’re No. 2 in applications ... At Oracle, silver medal is first loser."
- Catz's remarks come two weeks after SAP (presumably the company deemed #1 in apps) agreed to pay $8.3B to buy leading cloud travel/expense management software vendor Concur Technologies. Plenty of cloud software stocks rallied in response, as investors bet the deal would trigger fresh M&A activity in an industry that has already seen plenty.
- They also come two weeks after Oracle reported light software license growth amid slumping database sales and intense cloud competition.
- Oracle has already bought a long list of enterprise software firms in recent years. Major cloud-related purchases include marketing automation software vendors Eloqua and Responsys, customer support software firm RightNow, talent management software firm Taleo, and sales quote software provider BigMachines.
- More recently, Oracle paid $5.3B to buy point-of-sale hardware/software firm Micros. Thanks to its M&A binge and huge buybacks, Oracle had $32.6B in debt as of Aug. 31 to go with $51.6B in cash/investments.
- Yesterday: Oracle launches flurry of new products
Tue, Sep. 30, 2:48 PM
- Oracle's (ORCL -0.2%) PR department has been in overdrive as the company's annual OpenWorld conference progresses. More than a dozen hardware, software, and cloud services offerings have been launched or refreshed.
- Hardware launches include: 1) The FS1, a hybrid flash/disk storage system featuring software that tries to optimize price/performance through "fine-grain autotiering" of storage types. It faces competition from EMC, NetApp, H-P, and many others. 2) A new Exalytics In-Memory Machine (competes against systems running SAP's Hana) that delivers large performance/memory improvements. 3) A database recovery appliance said to deliver "zero data loss protection" for live databases.
- Software launches include: 1) Updates to Oracle's cloud ERP, HR, and CRM apps. The HR apps (face competition from Workday and SAP) have been given design changes meant to appeal to casual users, and the CRM apps now integrate BlueKai's data management platform. 2) New features for Oracle's Fusion middleware meant to improve data integration for cloud services and mobile apps. 3) A new release for the open-source MySQL database (has been losing ground to MariaDB).
- Cloud services launches include: 1) 6 new services for Oracle's cloud app platform (playing catch-up against Microsoft and Salesforce). 2) A Business Intelligence Cloud Service that joins Oracle's Analytics Cloud portfolio. 3) Mobile app development services meant to allow non-technical users to build apps.
- Oracle is counting on the launches to put a halt to its recent top-line struggles, caused in large part by soft hardware and database sales.
Wed, Sep. 24, 2:33 PM
- John Chambers has dismissed speculation Cisco (CSCO +1.3%) could make a bid for EMC (EMC -1.1%). "If [EMC CEO Joe Tucci] and I were going to do something here, we would have done it a year or two ago."
- Likely an issue today: A Cisco deal would raise antitrust issues in the network virtualization/SDN software space, where VMware (VMW -0.3%) and Cisco have emerged as the early leaders. Also, Cisco's storage networking unit relies on OEM deals with EMC rivals (in addition to EMC).
- Meanwhile, re/code reports Oracle (ORCL +1.5%), another company whose name was thrown around in EMC deal speculation, is also uninterested.
- Recent reports stated EMC has held merger talks with H-P, but failed to agree (for now, anyway) on a price. Sources (possibly hoping to drum up M&A interest in EMC) added a deal with Cisco or Oracle was also possible. Re/code backs up the part about the H-P talks, while adding H-P was largely interested in owning VMware VMW via EMC.
- Many on the Street still think EMC will make a deal before Tucci's planned Feb. 2015 retirement. Tucci hasn't named a successor yet; Argus' Jim Kelleher consider ex-CFO David Goulden, now the head of EMC's storage hardware/software unit, to be the favorite. VMware CEO Pat Gelsinger and Pivotal CEO Paul Maritz are also in the running.
Wed, Sep. 24, 2:03 AM
- Oracle's (NYSE:ORCL) new co-CEOs Safra Catz and Mark Hurd will receive a one-time option to purchase 500K shares of Oracle apiece, while outgoing chief exec Larry Ellison, will receive 750K fewer shares for the 2015 fiscal year.
- The new top execs also qualify for performance-based bonuses of 125K shares each, on top of the 562.5K shares of performance-based stock granted to them both in July.
- However, the company is slashing its long-term exec compensation program, lowering Catz and Hurd's total stock options to 2.75M a piece from 5M a year earlier.
Fri, Sep. 19, 4:54 PM
- Though Oracle's (ORCL -4%) cloud-related sales saw healthy growth in FQ1, its core database business saw negative license growth, notes Deutsche's Karl Keirstead, downgrading shares to Hold. "Coupled with Larry Ellison’s decision to give up the CEO role, our confidence in the core database business is getting tested and we’d prefer to step to the sidelines while Oracle shares are still near their 10-year high."
- While Oracle blames the database weakness on tough comps and sales execution - the latter is a common excuse among enterprise software firms - Keirstead also sees other factors at work: A mature relational database market; Microsoft's share gains; and a secular shift to new data types (e.g. Hadoop/NoSQL) and cloud apps (often running on non-Oracle databases). He estimates Oracle's FQ2 guidance implies a 3%-4% Y/Y drop in license revenue.
- D.A. Davidson (Neutral) also isn't thrilled with Oracle's numbers. "ORCL's financial results have now either missed or come in at the low end of management's guidance range in 7 of the last 9 quarters." Ditto Sterne Agee: "Given the current moderate size of the cloud business, the transition will span several years and create both revenue and EPS estimate volatility."
- On the other hand, Sterne (like many others) isn't concerned about Oracle's CEO change, calling it "more of a change in titles than in functions." On the CC (transcript), new co-CEOs Safra Catz and Mark Hurd insisted there will be no major operational changes.
- Wedbush, however, sees negative long-term implications. "Mr. Ellison's desire to delegate more responsibility (and credit) to Safra Catz and Mark Hurd is understandable ... but it underlines our view that Oracle's days as an organic grower are rapidly coming to an end."
- Prior Oracle coverage
Thu, Sep. 18, 5:40 PM
- Oracle (NYSE:ORCL) guides on its FQ1 CC for FQ2 Y/Y revenue growth of 0%-4%, and EPS of $0.66-$0.70. That's below a consensus for 4.8% growth and EPS of $0.74.
- Software/cloud revenue is expected to grow 3%-6% Y/Y vs. 6% in FQ1, and hardware revenue is expected to be flat to down 10%. SaaS/PaaS revenue is expected to grow 39%-44%, and IaaS revenue 40%-44%.
- Oracle largely blames the near-term weakness on a transition to cloud subscriptions from up-front licenses, though it also admits execution issues are hurting hardware and services sales. Micros is expected to provide a slight boost to FQ2 results.
- Shares -2.3% AH.
- Prior Oracle coverage.
Thu, Sep. 18, 4:29 PM
- Oracle (NYSE:ORCL) has added $13B to its buyback plan; that's good for repurchasing 7% of shares at current levels. As it is, $2B was spent on buybacks in each of the last three quarters.
- Software and cloud revenue (76% of total revenue) rose 6% Y/Y in FQ1 to $6.6B, hitting the low end of guidance for 6%-8% growth. However, new software license revenue (pressured by cloud competition) fell 2% to $1.37B.
- License update/product support revenue (fairly stable) rose 7% to $4.7B. Cloud app (SaaS) and app platform (PaaS) revenue rose 32% to $337M, towards the high end of guidance for 25%-35% growth. Cloud infrastructure (IaaS) revenue grew 26% to $138M, topping guidance for 10%-20% growth.
- Hardware revenue (hurt by UNIX server declines) remains weak, falling 8% to $1.17B; that's soundly below guidance for -1% to +3% growth. Hardware products -14%, support -1%. Services revenue -7% to $855M.
- GAAP opex +2% to $5.6B; sales/marketing spend +5% to $1.71B, R&D +7% to $1.32B.
- Shares -2.3% AH. CC at 5PM ET, guidance will be provided.
- FQ1 results, CEO news, PR
Thu, Sep. 18, 4:11 PM
- Along with its FQ1 results, Oracle (NYSE:ORCL) announces Larry Ellison is resigning as CEO. President/ex-H-P CEO Mark Hurd and CFO Safra Catz will act as co-CEOs going forward.
- Ellison, 69, is taking over the role of chairman from Jeff Henley, who has held it for 10 years, and has also been named CTO. Henley is now vice chairman.
- Sales, service, and "vertical industry global business units" will report to Hurd. Manufacturing, finance, and legal teams will report to Katz. Software and hardware engineering teams will continue reporting to Ellison.
- Director Michael Boskin: "Larry has made it very clear that he wants to keep working full time and focus his energy on product engineering, technology development and strategy."
- Shares -2.7% AH following the news and Oracle's FQ1 miss.
Thu, Sep. 18, 4:03 PM
Wed, Sep. 17, 5:35 PM
Mon, Sep. 15, 7:30 AM
- A provider of content storage management solutions that help companies mitigate, manage, and monetize large-scale media assets, Front Porch Digital helps businesses handle fast-expanding, complex volumes of digital media content like high-def films and shows, medical images and records, and real-time security-monitoring fees.
- Terms of Oracle's (NYSE:ORCL) purchase were not disclosed.
- Source: Press Release
Thu, Sep. 11, 7:08 PM
- After moving back above the $100/share level, Apple (NASDAQ:AAPL) is back over the $600B mark in market cap, pushing it nearly $200B above Exxon Mobil (NYSE:XOM), the next largest company in the U.S.
- XOM is still valued at more than $400B, but Google (NASDAQ:GOOG) at $397B and Microsoft (NASDAQ:MSFT) - which has surged in 2014, adding $74B in market cap to $386B - are closing the gap.
- Berkshire Hathaway (NYSE:BRK.B) completes the top five with a $339B market cap; no other companies are worth more than $300B.
- Rounding out the top 20 market caps: JNJ, WFC, GE, WMT, CVX, PG, JPM, FB, VZ, IBM, PFE, KO, ORCL, T, MRK.
Tue, Sep. 2, 5:28 PM
- Concur (NASDAQ:CNQR) approached SAP and Oracle (NYSE:ORCL) to "gauge their interest" in an acquisition, sources tell Bloomberg. Oracle, set to buy point-of-sale hardware vendor Micros for $5.3B, is said to have passed.
- No details are given on SAP's reaction. Back in January, the German software giant suggested it could make another big cloud software acquisition - it already has a few under its belt. But in April, SAP, which is counting on cloud growth to offset slumping traditional license sales, stated it considers itself under no pressure to make a deal.
- Concur has pared its AH gains: The cloud travel/expense software provider is now up 11%. Its market cap stands at $6.4B.
- Earlier: Concur reportedly exploring sale
Wed, Aug. 27, 7:21 PM
- IDC estimates global server sales rose 2.5% Y/Y in Q2 to $12.6B. That marks a turnaround from the 2.2% drop seen in Q1, and the 4.4% drop seen in Q4. Gartner estimates sales grew 2.8%.
- IDC declares the server market, hurt in recent quarters by system consolidation and a shift in demand towards the white-label gear beloved by Web giants (referred to by IDC as ODM Direct), is seeing "the beginning of a cyclical refresh cycle." It sees the pending launch of Intel's (NASDAQ:INTC) Grantley Xeon CPUs, along with Microsoft's plans to end Windows Server 2003 support, lifting sales into 2015.
- Sales of x86 servers (mostly Intel-based) rose 7.8% in Q2, and now make up 78% of industry revenue. Non-x86 server sales fell 12.8%.
- Market leader H-P's (NYSE:HPQ) share rose 40 bps Y/Y to 25.4%, with x86 growth offsetting Itanium weakness. #2 IBM's share fell 340 bps to 23.6% ahead of the sale of its x86 server ops to Lenovo; on the bright side, IBM's decline narrowed from Q1's 600 bps.
- #3 Dell's share fell 160 bps to 16.2%. #4 Oracle's (NYSE:ORCL) grew 10 bps to 5.9%, with engineered system growth offsetting declines for older UNIX/SPARC server lines. #5 Cisco (NASDAQ:CSCO), which recently proclaimed its UCS server ops are on a $3B/year run rate, saw its share rise 140 bps to 5.8% on the back of 35% growth. Cisco should pass Oracle in a quarter or two.
- ODM Direct vendors saw their share grow 110 bps to 6.6%. The shares of all other vendors rose 190 bps to 16.1%.
- Related tickers: SMCI, MLNX, QLGC, ELX
ORCL vs. ETF Alternatives
Oracle Corporation develops, manufactures, markets, hosts and supports database and middleware software, application software, cloud infrastructure, hardware system including computer server, storage and networking products and related services.
Other News & PR