Potential Acquirers for Sun: Oracle or Cisco?

Could Oracle (ORCL) or Cisco (CSCO) be potential acquirers for Sun Microsystems (JAVA), as talks between it and IBM are fading?

CSCO recently got involved into the computer server business, while ORCL has long been a close partner with Sun-- which specializes in making the kind of servers large companies use to run Oracle database software. With a huge cash pile of $29.5 billion, CSCO is a favorite among pundits looking for alternatives to IBM. Cisco could jumpstart its way into new computer hardware and storage businesses with Sun. Dell (DELL) or HPQ are very unlikely to express an interest in JAVA, since they're both committed to selling so-called industry-standard servers that run on microprocessors made by Intel (INTC) and Advanced Micro Devices (AMD).

IBM originally was talking to Sun about paying $10-$11 per share to buy Sun, but reportedly cut its offer to between $9.10 and $9.40 after due diligence, leading Sun to walk away. Currently at 6.50/share, JAVA must be feeling the pressure of having backed away from a lucrative deal with IBM. Moreover, JAVA's executive board members owe shareholders an explanation as to how their company is worth north of 10/share.
Depending on your level of patience tolerance, purchasing the shares at the current level of 6.50 and writing the May strike 5,6, or 7 may be very rewarding. If you're ultra-conservative, the "deep in the money" May strike 5 calls at 1.97/contract still offer an intrinsic value of .35/share, according to last Friday's close. That isn't an anemic return coupled with nearly 1.95/share downside protection!?

Let's examine May strike 6 and 7 for those who desire to earn more premiums on their contracts while having less downside protection to their underlying shares. At 6.50 /share, the May strike 6 calls are offered at 1.30 /contract for an intrinsic value of .90/contract. If the underlying shares get "called away" by option expiration (the third week of May), the investor would pocket .90/contract. If the shares remain below the strike price of 6, then the investor will keep the entire 1.30 /contract plus the shares. However, holding JAVA below 6/share provides the perfect bargain opportunity to accumulate additional shares and dollar cost-averaging. If IBM liked the Java at 9.33, wouldn't they be salivating to resume talks at 6 or below.
Similarly, the "out of the money" May strike 7 at nearly .80/contract provides the holder a juicy premium of .80/share as well as an .80 pullback.

Author: Jack Haddad @ http://seekingalpha.com

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Oracle Financial introduces new enterprise application

The new application helps centralize exposure management across the entire spectrum of offerings. Oracle Financial Services Software has introduced Oracle Flexcube Enterprise Limits and Collateral Management, an enterprise application that enables banks to achieve a holistic view of their exposure by helping them to centralize collateral management, limits definition, and tracking and measurement of exposure across the institution.

Customers using Oracle Flexcube Enterprise Limits and Collateral Management can centralize exposure management across the entire spectrum of offerings including loans, trade finance, treasury and overdrafts, said Oracle Financial.

The application is process-driven and designed to deliver capability that helps banks to deploy it centrally. It leverages the Oracle Industry Reference Model for Banking to help standardize business processes and replicate best practices across the enterprise.

Oracle Flexcube Enterprise Limits and Collateral Management enables efficient limits monitoring across the institution with centralized online tracking and monitoring of multi-currency limits for all transactions across all branches or entities - in countries as well as regions.

The system helps banks make informed credit decisions with accurate credit information, by customer and segment, while also helping to improve exposure management with collateral pooling and contribution controls, added Oracle Financial.

NRK Raman, managing director and CEO of Oracle Financial Services Software, said: "Oracle Flexcube Enterprise Limits and Collateral Management is a comprehensive, standards-based solution that enables banks to centralize their processes as well as monitor, control and report their exposure to key stakeholders and regulators. To meet the needs of customers, the application is designed to co-exist with a bank's current application environment to minimize the resources and costs associated with getting these processes streamlined."

Source: http://enterpriseapplications.cbronline.com

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Oracle sticks to guns over maintenance fees

It has become a regular ritual during Oracle's quarterly earnings conference calls. Company executives point to the vendor's lucrative revenue stream from maintenance - paid annually by customers as a percentage of their license fees - and bask in the approving glow of the financial analysts on the line.

Maintenance revenue is particularly crucial to software vendors during a recession, when many customers are holding back on buying new licenses.

Oracle reported $2.9 billion (£1.8 billion) in revenue for "software license update and product support" in its third quarter and incurred just $256 million in expenses against that total, for a roughly 90 percent profit margin. In contrast, the vendor logged about $1.5 billion in new license sales in the quarter, which it reported last month.

It's no surprise, then, that Oracle isn't budging an inch on maintenance fees as it works to finalise new contracts by the end of its fiscal year on May 31, say analysts and consultants.

"People have gotten different concessions initiated by maintenance or around maintenance, but I wouldn't say they're getting discounts on maintenance," said Forrester Research analyst Ray Wang.

For example, a customer's contract may include a clause that allows for the customer's maintenance bill to be adjusted each year according to the Consumer Price Index, a key measure of inflation.

Some users are managing to get Oracle to relent on this, said Eliot Arlo Colon, president of Miro Consulting, a Fords, New Jersey, company that advises Oracle customers on contact negotiations.

Wang echoed Colon. "I've seen this happen recently with a lot of deals, including Oracle," he said.

This particular concession may be more possible now because the CPI has been anemic so far this year.

Miro clients are also letting maintenance lapse on less mission-critical applications, according to Colon.

Meanwhile, Oracle's willingness to discount new licenses has been "roughly the same" as last year, Wang said.

Instead, the company is trying to give customers more bonus items, he said: "They're assisting you with installation, adding training, adding other products and tools that can help the application succeed."

These non-discount areas can actually be more valuable to a client than a price discount, according to Wang.

But for some users, such as those who "need a lot of hand-holding" or are rapidly expanding their use of the software, maintenance fees may well be justified, Wang said.

Oracle also spends billions each year on research and development, reinvesting with help from maintenance revenue, Wang added.

Indeed, some Oracle customers say they aren't troubled by the vendor's fees.

Zebra Technologies has adopted Oracle widely, moving away from a previous strategy that employed a lot of custom development and a legacy ERP system.

The Lincolnshire, Illinois, printing and labelling company now has an enterprisewide license agreement with Oracle, and has hired "key people" to work in-house instead of paying outside consultants, said Jeffrey Hand, director of IT.

As a result, from an integration standpoint, Zebra is saving about 60 percent over the old model, he said: "We're getting out of the software business."

Wind River Systems, which sells products and services for optimising device software, is planning to buy Oracle BI (business intelligence) software to run against its financials application, said vice president and CIO Scott Fenton.

While he has "been very successful" at garnering significant license discounts from the vendor, Fenton takes the cost of maintenance in stride.

"Paying maintenance is like getting a tuneup on your car," he said. "Oracle is top-notch. It's best-in-class support. It's a valuable service and part of doing business."

Author: Chris Kanaracus, IDG News Service @ www.techworld.com

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