With economy sluggish, all eyes will turn to Oracle

Investors looking to gauge the effect of the troubled U.S. economy on the technology sector will focus on Oracle Corp.'s second-quarter earnings report, expected after the market's close Wednesday.
Analysts polled by Thomson Financial expect Oracle to post earnings of 27 cents a share for the period ended in November, on $5 billion in revenue.

Many analysts and investors are keen to hear what Oracle has to say about the health of its business now, amid the ongoing credit crunch and troubles stemming from the subprime mortgage crisis.
Business software maker Oracle has numerous customers among the country's largest financial services firms and other corporations. Some have speculated that these firms may scale back their purchases of software and other technologies amid the economic turbulence.

But analysts have made generally positive predictions for Oracle's quarterly results and outlook. Broadpoint Capital analyst Mark Murphy wrote in a note to clients Tuesday that he expects Oracle to beat consensus estimates on second-quarter sales and profit.
"Despite signs of softening macroeconomic demand, we continue to view our [Oracle earnings] forecast as being relatively resilient, due to Oracle's acquisitiveness and its large base of recurring maintenance revenue," Murphy wrote.
Oracle has turned in a string of well-received quarterly reports this year, translating its many recent acquisitions into quickly growing revenue while branching into new and more specialized areas of the business software market.
Shares of Oracle have risen more than 20% in the year-to-date, while U.S.-traded shares of rival business software maker SAP AG have fallen roughly 5%. Oracle shares rose slightly Tuesday, to $20.98.

Oracle's most recent acquisition, of Netherlands-based Moniforce, was announced earlier this month. Performance management software maker Moniforce "has a presence in the retail, federal, and financial sectors," CIBC World Markets analyst Brad Reback wrote in note released to clients.
Though Oracle's sales to financial firms may be slowed by the credit crunch, it should be able to cover its losses in the second quarter with gains in sales in other sectors, Global Equities Research analyst Trip Chowdhry wrote in a note to clients earlier this month.
The "subprime mortgage industry may negatively impact Oracle's business by 2% to 4%," Chowdhry wrote, "however strength in healthcare, packaged goods and hi-tech verticals may offset the above weakness."
Chowdhry said he is expecting a "positive revenue surprise" for Oracle's second-quarter results, and "in-line guidance."
Pacific Crest Securities analyst Brendan Barnicle concurred with Chowdhry's upbeat expectations for the quarter.
"We have been very surprised by the strength of our [second-quarter] Oracle channel checks," Barnicle wrote in a note to clients earlier this month.
Barnicle said he's heard of strength in Oracle's sales to financial services firms, "which we certainly did not expect," as well as strong sales to small and medium-sized businesses, "which has historically been weak."

Author: John Letzing @ www.marketwatch.com

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