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Oracle: Deeply Undervalued At $27

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Stock Croc

Oracle (NYSE:ORCL) has been aggressive with acquisitions that offer research and development without a lot of risk. Oracle has been able to integrate new acquisitions to improve growth, revenues, but in the acquisition of Sun Microsystems the company bought itself a lawsuit. Oracle operates in a tough environment with competitors like Microsoft (MSFT), SAP AG (SAP), and IBM (IBM).

Oracle Can Attack with Java

Oracle is currently in a legal battle with Google (GOOG) regarding the fair use of Java technology. The lawsuit against Google by Oracle consists of three basic questions: Did Google violate copyright laws, did Google infringe on Java patents, and what, if any are the damages. Google admitted to using 37 Java APIs during the development of its Android operating system for smart phones. This month, the jury concluded that Google did infringe on Java API copyrights but it was also split on whether Google infringed on the copyrights under Fair Use. Initially, Judge William Alsup did not want a split decision, but after jurors came to a stalemate on whether Google proved "Fair Use" or not, Judge Alsup has accepted a partial verdict. The verdict has prompted Google to ask for a mistrial on "Fair Use". The trial is now in phase two and is on-going in the United States District Court, Northern District of California.


I believe Oracle's stock is undervalued at $27 per share because of its competitive advantages in relational databases, Java technology, middleware and software. I also think there are reasons that make the stock unattractive too. First off, the hardware sales are not going quite as well as planned after the acquisition of Sun Microsystems. Second, the lawsuit has general investors worried. Third, software licenses are declining. It is expected to be reduced from 19% in 2011 to 7% in 2012. Fourth, is the European affect on two

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Comments (1)

SC, it is good that you have no position in the stock in spite of your headline assertion of Oracle's deep undervaluation. I differ, for the following reasons:
- Oracle is by now a hodge podge of deeply siloed, software and hardware platforms;
- their core platform, the database platform, is now under intense competition from IBM, Microsoft and of late, SAP;
- they did a faux pas in estranging themselves from their long-term trojan horse against IBM, i.e. HP in the crudest manner thinkable, and this 'cursed war' continues, made all the more intense (and insane) by the hiring of Mr. Hurd;
- they have also bought themselves lots of FUD among long loyal clients, as their predatory moves to extract huge financial values from Java (and its derivatives) platform, which was a free, open platform during its Sun days. Coming after doing the same with Open SQL, memories will be hard to forget;
- Fusion, for all intents and purposes, seems to be DOA, as I do not understand why there is almost no news on this important future foundation of Oracle; and finally,
- Mr. Hurd may have successfully turned around a highly complex company like HP, but I submit that his job was made so much easier by the constant misfortunes and underminings (by her fellow HP directors then), but his trule mettle is yet to be proven at Oracle, a far simpler job, imo. The jury awaits, but I fear his 'fuse' is finally blown, as he will prove no match for the real challenges of making 'hay out of the Sun shine' acquisition.

Alas,we don't have a long time to wait, I sincerely feel there are many win/win customer opportunities Oracle is leaving on the table, for the likes of IBM, SAP, ACN, Microsoft (and recently, even Amazon and Google), but that story is for another day. Meantime, they really should stop curing themselves of this 'follow the hurd' patent litigating disease.
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