Oracle Earnings To Glimmer Into 2008 Enterprise Spending (ORCL, BEAS)

After today’s close, we will get to see the highly expected earnings report out of Oracle (NASDAQ: ORCL).  First Call has estimates at $0.27 EPS on revenues of $5.04 Billion.  The company usually holds off on offering guidance until its conference call, so until that is given we will probably consider the initial earnings report as somewhat incomplete data.  Next quarter’s estimates are $0.29 EPS and $5.19 Billion in revenues.  Fiscal May 2008 shows estimates at $1.22 EPS on almost $21.5 Billion.

The pricing in stock options today isn’t indicative of more than a 2.5% expected move, although with shares down 2% ahead of results we admit that this may be off.  Analysts have an average price target of almost $25.00 as of now, and that is higher than in the past when the shares were under $20.00.  Its 52-week trading range is $15.97 to $23.00, and since early November this traded under $20.00 and near $23.00.  So this report could easily cause a stronger directional move than options pricing would indicate.

Oracle’s market cap today is over $106 Billion even after the drop.  Another key metric, perhaps more than the actual report on an "after currency basis" will be its business spending expectations for 2008.  Since Oracle is last among software companies to report and since it is almost two-months later than other software companies right ahead of the end of 2007, this may have more impact in the overall software sector than others.

As Larry Ellison has been unloading shares, this has been given a greater notice of late.  While many feels he has been opportunistic in selling at the top, he does still have more shares than he could get rid of in years.  We may get to hear about any future plans for BEA Systems (NASDAQ:BEAS), although that is presumable dead in the water until the next BEA Systems stock drop.  But there is one word we expect to hear in the outlook and "looking ahead comments" that has been a somewhat vacant initiative at Oracle: VIRTUALIZATION.

Lastly, NetSuite (Ellison backed it) will have its IPO tomorrow and that range was just recently bumped up in its expected pricing.

Jon C. Ogg
December 19, 2007

Jon Ogg can be reached at [email protected]; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.