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 achieved an impressive growth in cloud computing in its latest quarter.
- Oracle is determined to become number one in both the SaaS and the PaaS businesses.
- Oracle has good valuation metrics and strong earnings growth prospects. The company is generating strong free cash flows and returns value to its shareholders by stock buyback and dividend payments.
Oracle's Efficient Investment Spending Supports Future Growth
- Forecasted 50% increase in IT spending.
- Strong fundamentals indicate attractive valuation.
- Efficient investment spending supports growth.
Oracle Can Really Take Off From Its Mobile Platform With A Handset Push
- There has been a slow adoption of Oracle Mobile Platform.
- Companies may expect complete mobile cloud offerings, and Oracle needs to be more proactive with its cloud sales efforts.
- Oracle should use mobile handset as a springboard to get more business customers on board with its mobile platform.
- A alliance with or acquisition of BlackBerry (the handset unit) may improve Oracle's competitive position against rivals such as IBM and Microsoft.
Oracle's Larry Ellison Is Still Putting His Cash To Good Use
- It's foolish to bet against Oracle, which is being led by a CEO that will look under every rock to win.
- Given Oracle's strong innovative edge, not to mention its $40 billion in cash, patient investors should expect a stock that reaches $45 in the next 12 to 18 months.
- Customers want a vendor that can integrate the hardware and software and make it work together. Neither Salesforce.com or Workday can say that.
- The competition in the sector is getting intense with Salesforce.com and SAP AG fighting for more market share.
- Oracle's aggressive strategy will help the company fight the competition in the sector.
- Micros Systems acquisition will bring diversity to the products portfolio and the offering of the company.
- We pit two companies from the technology sector, Oracle and SAP, against one another in the latest installment of our Head-To-Head series.
- The article focuses on the relative strengths and weaknesses of Oracle and SAP based on business performance and sustainability/dividends/forecasts.
- It ends with discussion of the current valuations of the two companies, and details whether Oracle represents good relative value at current price levels.
Oracle May One Day Be Your Software Superstore, On The Ground If Not From The Cloud
- On-premise software installation remains Oracle's focus, as evident in its Micros Systems acquisition.
- Oracle currently derives an overwhelming portion of its software sales from software installation and licensing, rather than subscriptions from the cloud.
- Some software makers may focus on innovative software distributions, while others may center on new software contents.
- Oracle's industry-specific strategy may aid in its continued software development, and thus, sales.
- Oracle missed analysts’ estimates of its earnings but also posted some positive points for long-term growth.
- Oracle is expanding its cloud network to capitalize on the growth of global spending on cloud services.
- The worldwide spending on public IT cloud services is expected to grow at a CAGR of 17% over the next four years.
Did Oracle Get A Good Deal By Acquiring MICROS Systems?
- Oracle recently acquired MICROS Systems for $5.3 billion.
- This acquisition makes sense when we look at it fundamentally.
- MICROS Systems complements the existing Oracle products in several industries.
- Oracle took a hit after fourth-quarter results, as it felt the pain of a transition in the business.
- Oracle is making solid progress as far as the transition is concerned, and recently agreed to acquire Micros to bolster its position further.
- Oracle's solid profit margin and sound fundamentals make it a good buy on the pullback.
Oracle - Long Awaited MICROS Deal Finally Materializes
- Oracle reported a relatively soft set of results on Friday.
- It now announces a $4.6 billion acquisition of MICROS Systems, bolstering cloud and enterprise offerings.
- The deal makes perfect sense, ensuring modest topline revenue growth in the coming year as the business remains in transition.
- I remain a buyer in the $36-$38 region.
Oracle: Sell-Off Is An Overreaction Given The Comforting Outlook
- Investors punish Oracle for "disappointing" cloud numbers.
- Despite solid growth, Oracle has a long way to go as the cloud operations are still very modest in size.
- Investors should find comfort in the guidance, the rock solid balance sheet and fair valuation.
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
Oct. 4, 2013, 4:31 AM
- Oracle (ORCL) CEO Larry Ellison will forgo a potential payout of $500M in order to settle accusations of conflicts of interest in the company's 2011 purchase of Pillar Data Systems, a data-storage firm that Ellison controlled.
- Oracle originally agreed to pay for the acquisition based on Pillar's performance through 2014 but none up front. Ellison was to receive the first $562M of any payment connected to the deal, but he will now return 95% of any money he gets back to Oracle.
- The settlement comes after lawsuits from two shareholders, and amid criticism over Ellison's large salary.
Sep. 23, 2013, 11:17 AM
- Back from the America's Cup, Larry Ellison (ORCL -0.6%) was his usual self during an Oracle OpenWorld speech, trash-talking rivals and promising upcoming Oracle products will blow away existing offerings.
- Grabbing the most headlines: Ellison's boast that an expected in-memory version of Oracle's flagship 12c database will improve analytics query speeds by 100x, and transaction-processing rates by 2x, over a standard relational database. Ellison also stated customers will have to "just flip a switch" to turn a regular 12c database into an in-memory database.
- The product is aimed squarely at archrival SAP (SAP -0.2%), whose market-leading Hana in-memory database is expected to post 2013 sales of €650M-€700M (that's up from 2012's €392M, but some think the figures are inflated). Though not applicable to all traditional database deployments, Hana is viewed as a long-term threat to Oracle's database cash-cow.
- SAP has been busy expanding Hana's reach this year, adding support for its core Business Suite apps, expanding 3rd-party app support, and launching a Hana managed cloud service for migrating on-premise SAP apps.
- Ellison also promised Oracle will launch a new high-end server, known as the M6-32 Big Memory Machine, for in-memory deployments; the server will support up to 32TB of RAM, and cost a hefty $3M. Oracle's hardware product sales fell 14% Y/Y in the Aug. quarter, easily missing guidance.
- Also on tap: a database backup appliance and a related cloud backup/recovery service. By constantly receiving database logs and supporting restores to any log points, Ellison asserts the appliance is a better solution for databases than standard backup systems.
Sep. 22, 2013, 3:24 PM
- Gartner estimates that by 2017, the largest portion of corporate IT spend will be controlled by chief marketing officers (CMOs) rather than CIOs. CLSA's Ed Maguire views cloud CRM software kingpin Salesforce (CRM) as a major beneficiary of this trend, particularly following its $2.5B deal to acquire ExactTarget. Salesforce is adding ExactTarget's marketing automation software to its growing Marketing Cloud platform.
- Other ad software/tech names that benefit from a spending shift to CMOs include Adobe (ADBE), Responsys (MKTG), Marketo (MKTO), Constant Contact (CTCT), and Marin Software (MRIN). Adobe's own Marketing Cloud saw 28% Y/Y sales growth in the August quarter, and was recently bolstered by the $600M purchase of ad campaign software vendor Neolane.
- Like Salesforce, SAP is trying to create an end-to-end CRM platform aimed at CMOs. It recently bought top e-commerce software firm hybris for a reported $1.2B-$1.5B.
- Maguire also states Salesforce's data integration deal with Workday (WDAY), together with a prior deal with Oracle (ORCL), "reinforce [Salesforce's] prominence as a de facto CRM standard." He reports hearing of "at least one competitive engagement where a customer chose Oracle over Workday" because the latter's Salesforce integration wasn't good enough.
- Nomura feels likewise about Salesforce, and thinks its deals help negate the historical edge SAP has had in app integration (courtesy of its own apps, rather than partnerships). With two key ERP/HR software rivals striking deals with Salesforce, SAP is on the spot to strike one of its own.
Sep. 18, 2013, 5:22 PM
- Oracle (ORCL) guides on its FQ1 CC (webcast) for FQ2 revenue growth of -1% to +2% Y/Y and EPS of $0.64-$0.69. That's largely below a consensus of 3.2% and $0.69.
- FQ2 software license/cloud subscription revenue growth is expected to be in a range of -6% to +4% Y/Y, and hardware product growth in a range of -11% to -1%. Those ranges compare with FQ1 growth of +4% and -14%, respectively.
- CFO Safra Catz claims Oracle is optimistic about deal opportunities and the impact of new products, but adds sales leaders are being "very careful" about their forecasts in light of macro/business conditions.
- Oracle has already posted disappointing license growth more than once this year. That, in turn, has stoked fears of share losses to cloud software firms.
- Larry Ellison has skipped the CC to take part in the America's Cup.
- FQ1 results, details
Sep. 18, 2013, 4:28 PM
- Oracle's (ORCL) software license/cloud subscription revenue rose 4% Y/Y in FQ1 to $1.66B. The growth rate is better than FQ4's disappointing 1%, and hit a guidance range of -1% to +7%. But hardware product sales fell 14% Y/Y to $669M, missing a guidance range of -6% to +2%. 60% engineered system sales growth apparently failed to offset plunging SPARC/UNIX server sales.
- Software license update/product support revenue (flows from existing license deals) rose 7% Y/Y to $4.43B, up from 6% in FQ4.
- $3B was spent on buybacks, up from FQ4's $2.8B and allowing EPS to beat estimates in spite of a revenue miss.
- Americas sales rose 4% Y/Y to $4.52B, aided by 14% growth in software licenses/cloud subscriptions. EMEA +2% to $2.44B, but with a 4% license/subscription drop. Thanks in large part to forex, Asia-Pac revenue -4% to $1.42B, licenses/subscriptions -5%.
- Opex +4% Y/Y, outpacing rev. growth of 2%. An 11% increase in sales/marketing spend to $1.71B offset lower G&A and hardware-related expenses.
- ORCL +0.8% AH. CC at 5PM ET, guidance should be provided.
- FQ1 results, PR
Sep. 18, 2013, 4:03 PM
Sep. 18, 2013, 12:10 AM
Sep. 17, 2013, 5:35 PM
Sep. 14, 2013, 4:23 PM
- Google (GOOG) has become the latest firm to announce it will stop using the Oracle-distributed (ORCL) MySQL open-source database in favor of offshoot MariaDB.
- Other organizations abandoning MySQL for MariaDB include Wikipedia (the world's 7th-largest site) and Linux developers Red Hat and SUSE.
- Discussing Google's move, engineer Jeremy Cole stated that while his company "[values] stability and performance over fancy new features. Oracle doesn’t always feel the same way." Cole also accused Oracle of "[ignoring] bugs, feedback, and communication from the [MySQL] community." Google is said to have "thousands" of modified MySQL instances running across its servers.
- Developers have already been arguing MariaDB offers better performance than MySQL, and that Oracle is slow to address bugs and security issues. There have also been complaints Oracle is undermining MySQL's open-source nature via proprietary modules.
- Ever since Oracle announced it would be acquiring Sun (and with it, MySQL), the company has been dogged by accusations owning both the most popular open-source database and the most popular proprietary database (responsible for billions in annual profits) presents a huge conflict of interest. At the time of the deal, Oracle promised EU regulators it would keep actively supporting MySQL.
Sep. 11, 2013, 7:01 PM
- Though CRM software archrivals Salesforce (CRM) and Oracle (ORCL) are fresh off announcing a major data-sharing/IT infrastructure partnership, that hasn't stopped Salesforce from recruiting top Oracle sales personnel.
- Three months after naming former Oracle North American sales chief Keith Block (left Oracle in 2012) its president and vice chairman, Salesforce has named Anthony Fernicola, until recently a senior North American Oracle sales exec, its enterprise sales chief. Fernicola will report to Block. (PR)
- Salesforce has already nabbed plenty of Fortune 500-caliber enterprise clients, but many of its deals have been at the division level. Growing the number of company-wide enterprise Salesforce deployments will undoubtedly be one of Fernicola's top priorities.
- Though Salesforce seems to be doing more damage in its talent battle with Oracle, the damage cuts both ways. In August, Oracle hired former Salesforce exec Kate FitzGerald to head its CRM sales efforts.
- In July, JMP and BI reported Oracle is seeing major sales personnel turnover and growing employee frustration. Several SA commenters provided anecdotal observations generally backing up those reports.
Aug. 28, 2013, 2:52 PM
- The decline is a little better than Q1's 5% drop, but still points to a bleak demand environment, as enterprise attempts to improve server efficiency (via consolidation and virtualization) and a mix shift towards cheaper, white-label servers preferred by Internet/cloud companies hurt sales. (PR)
- IDC is even more pessimistic, estimating revenue fell 6.2% and units 1.2% (lower ASPs). (PR)
- x86 servers (largely INTC-based) continue gaining share: Gartner thinks sales rose 2.1% Y/Y and units 4.5%. The opposite holds for Unix servers: sales -25.3% and units 27.4%. "Other" server sales (inc. IBM mainframes) rose 6.9%.
- IBM and H-P (HPQ), whose enterprise hardware units have fallen on hard times, remain the industry's top vendors, but continue to bleed share. IBM's share fell 160 bps Y/Y to 25.6%, and H-P's 420 bps to 25%.
- DELL and Cisco (CSCO), as demonstrated by recent earnings numbers (I, II), remain share gainers. Dell +210 bps to 17.7%, Cisco +150 bps to 4.4%. Oracle (ORCL), which is seeing rising (Intel-based) engineered system sales and plunging Unix/SPARC CPU server sales, is assigned a 5.8% share (-20 bps).
- "Other" vendors, including white-label firms, had a 21.5% share (+230 bps). IDC estimates sales of density-optimized servers (beloved by Internet companies) rose 26.6% to $735M, and now make up 6.2% of server revenue.
Aug. 21, 2013, 7:45 AM
- The maker of sales-tracking software looking to take on rivals like Salesforce.com (CRM) and Oracle (ORCL) will use the cash for further R&D and to expand its sales efforts. Prior to Goldman's (GS) investment, the company had raised $79M. CEO Larry Augustin hasn't commented on valuation beyond saying it's "up and to the right" since the last financing round.
- Augustin said late last year the company is nearing profitability and could go public as soon 2013 (joining other recent IPOs WDAY and NOW).
- Goldman VP Antoine Munfa will join SugarCRM's board.
Aug. 19, 2013, 12:29 PM
- Countering last week's Reuters report, AllThingsD's Hesseldahl reports China's Ministry of Public Security isn't investigating IBM, EMC, and Oracle (ORCL) over security concerns.
- However, Hesseldahl does state U.S. tech companies are on edge over "a noticeable escalation in tension between the U.S. and China on the cyber-security front." Recent NSA spying disclosures, hacking incidents blamed on the Chinese government, and efforts to prevent Huawei and ZTE from selling equipment to U.S. carriers are the clear triggers.
- A source at a U.S. company notes "there has been a clear uptick in mentions in [Chinese] tech and business media of a growing desire among Chinese IT customers to 'buy Chinese.'"
Aug. 17, 2013, 5:41 PM
- In a June Information Week survey covering enterprise app use (excludes software such as Windows, Office, and databases), 24% of respondents named Microsoft (MSFT) their "most strategic " app supplier, up from 19% in April '12.
- Though its Windows sales have fallen, Microsoft has been seeing solid billings growth for enterprise app offerings such as Dynamics, Exchange, Lync, and SharePoint.
- Salesforce (CRM) rose to 10% from 6%. The company posted 25% Y/Y billings growth in FQ1, and is reporting FQ2 results on Aug. 29.
- On the other hand, Oracle (ORCL), which is coming off two quarters of license revenue misses and is reportedly dealing with salesforce turmoil, fell to 23% from 30%. Archrival SAP fell slightly to 15% from 16%.
- The cloud migration continues: 46% of respondents said their companies are using cloud/SaaS apps, up from a prior 38%. Not surprisingly, companies are more comfortable moving CRM and HR apps to the cloud (Salesforce and WDAY have led the way) than moving ERP apps (SAP's stronghold in the on-premise world).
- Also, 60% said their firms are using or considering a cloud app platform such as Salesforce's Heroku and Force.com vs. a prior 52%, and 48% said the same for cloud infrastructure platforms such as AWS (AMZN) vs. a prior 41%. Windows Azure competes in both realms.
- Interestingly, in spite of the rapid growth SAP has seen for Hana, only 13% of respondents said their firms are using an in-memory database. Another 37% are considering, and 50% are unlikely to consider it.
Aug. 17, 2013, 9:02 AM
- The market's more richly valued than you think, writes Jack Hough in Barron's, as Q4 S&P 500 (SPY) earnings are expected to rise 10.5% on just a 0.6% increase in revenue. "Where's that margin growth going to come from," asks S&P's Howard Silverblatt. "Most of us aren't exactly napping on the job as it is."
- Avoid sectors particularly prone to estimates cuts like consumer discretionary (XLY) and telecom (IYZ), suggests Hough, but favor safer groups like tech (XLK, though Cisco last week calls "safe" into question) and health care (XLV).
- A stock screen scoring companies by free cash yield as well as ability to still boost margins yields 5 top picks:
- Pfizer (PFE) trades inline with a slow-grower like Merck (MRK) but maybe deserves a multiple closer to a fast-grower like Bristol-Myers Squibb (BMY).
- Danaher (DHR) - it trades at what seems like a pricey 18x earnings, but just 15x projected free cash.
- Lear (LEA) at 10x earnings is growing faster than the auto market as a whole as it picks up market share and electrical content in cars is rising.
- Oracle (ORCL) and Qualcomm (QCOM) have both seen earnings growing faster than their share price of late, leaving them attractively priced.
- The screen also yielded 3 to avoid:
- Tiffany (TIF) at 20x earnings is pricing in faster earnings growth in 2014. Praxair (PX) expectations are for a near-doubling in earnings growth to 13%. Lennar (LEN) with 32% projected earnings growth remains pricey even as the housing recovery appears to be slowing.
Aug. 16, 2013, 2:46 AM
- China's Ministry of Public Security and a cabinet-level research center are reportedly planning to investigate IBM (IBM), Oracle (ORCL) and EMC (EMC) over security issues.
- The prospective inquiry comes after Edward Snowden's revelations of the National Security Agency's surveillance of user data at major tech companies, and that it hacked into critical networks at Chinese and Hong Kong universities.
- It also follows U.S. accusations of widespread Chinese hacking and amid American hostility to telecom infrastructure companies Huawei and ZTE because of security concerns.
- The probe would add to a growing number of Chinese investigations into major foreign firms, although these have focused on their business practices.
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.
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