Oracle looks to rebound in typically strong quarter

Oracle Corp. is expected to post solid profit and sales gains when it reports results after the market's close Wednesday for its fiscal fourth-quarter, typically its strongest period of the year.

The software giant is looking to rebound after delivering largely disappointing results in its previous, third quarter. See related story.
Analysts on average estimate business software maker Oracle (ORCL 22.70, +0.26, +1.2%) will report earnings excluding special items of 45 cents a share for the period ended in May, and $6.85 billion in revenue, according to FactSet Research.
That compares to earnings excluding special items of 37 cents a share, and $5.83 billion in revenue in the same period a year earlier.

While concerns have been raised about Oracle's performance amid the U.S. economic slowdown, the company is expected to be bolstered by overseas sales and an acquisition spree that has it well positioned in its various businesses.
Shares of Oracle have risen nearly 15% in the past three months, and closed Thursday at $22.70.

Oracle closed its $8.5 billion acquisition of middleware provider BEA Systems Inc. in April, and Jefferies & Co. analyst Ross MacMillan wrote in a note to clients Wednesday that he expects that to contribute earnings of a penny a share in Oracle's fiscal 2009, and 3 cents a share in 2011.

MacMillan wrote that Oracle is now able to make deep cost cuts at BEA, which should increase BEA's operating margin to 43% from 21% by the end of fiscal 2009.
For its recently ended quarter, MacMillan predicted a "rebound" in the Oracle's applications business, and "modest U.S. weakness."

"Europe and [Asia] remain strong and should continue to bolster the weaker Americas," MacMillan wrote.
Citigroup analyst Brent Thill wrote in a note to clients Wednesday that Oracle's recent price increases are a positive sign. On June 16, the company issued new prices for products that reflected a significant jump.

"We view this hike as positive for [Oracle's] overall business," Thill wrote, because they reflect the company's dominant or second place position in its various markets.

"We have not witnessed a price lift of this magnitude for many years," Thill wrote.
While Oracle may well eventually drain the well of potential new acquisitions to further fuel its growth, Thill wrote that this is still a number of years away.
The company should be able to grow and expand margins through fiscal 2011, "as it makes further purchases," Thill wrote.

Author: John Letzing @ www.marketwatch.com

Read more ...