"The Daily Double - A review of a company whose stock price has doubled within the last year.
Nov 29, 1999
Oracle Corp.
Ticker: (Nasdaq:ORCL - news)
Phone: 650-506-7000
Website: www.oracle.com
Price (11/26/99): $73 5/8
By Rick Aristotle Munarriz
How Did it Double?
Who wants to be a billionaire? When Oracle's CEO Larry Ellison announced that online efficiencies would shave a billion dollars from the company's annual
expenses by 2002, most analysts were skeptical. In a smug Philbinesque manner, they figured it couldn't happen. No way. Is that your final answer?
Earlier this month the company detailed plans to back Ellison's cost-cutting strategy. Consolidation of its information technology functions is expected to account for
10-20% of the billion dollars in savings. The major push will come by the end of Oracle's next fiscal year -- when it expects to be completing 80% of its software
sales online.
Beyond improving margins, whose deterioration in fiscal 1998 kept the shares anchored while its tech-stock brethren soared, Oracle has been improving
perceptions. As the database giant transforms itself into a one-stop solution for e-commerce, Wall Street has taken notice and is now seeing Oracle as the Internet
play it was all along.
Business Description
Oracle is one of the world's largest software companies, second only to Microsoft (Nasdaq:MSFT - news) . The California-based software maker is the leading
provider of global e-business solutions for Internet commerce and Web-based applications.
The company's product lines include database, server, enterprise business applications, and application development and decision support tools.
Financial Facts
Income Statement
12-month sales: $9,062.7 million
12-month income: $1,331.5 million
12-month EPS: $0.90
Profit Margin: 14.7%
Market Cap: $109,789.6 million
Balance Sheet
Cash: $2,721.7 million
Current Assets: $4,788.6 million
Current Liabilities: $2,549.3 million
Long-term Debt: $300.8 million
Ratios
Price-to-earnings: 81.8
Price-to-sales: 12.1
How Could You Have Found This Double?
Last year, Ellison said it best, "If the Internet turns out not to be the future of computing, we're toast. But if it is, we're golden."
Shareholders have found a goose laying some nifty precious metal here. Information is the key to e-commerce. While shares of Cisco Systems (Nasdaq:CSCO -
news) deserve the hardware spotlight in the Internet revolution, why not direct the software spotlight on Oracle -- which, even after recent gains, still commands just
a third of Cisco's market cap? In a virtual store, information is everything. With leading online merchants like Amazon.com (Nasdaq:AMZN - news) and CDnow
(Nasdaq:CDNW - news) providing glowing testimonials for Oracle8i, the company was destined to log on and run with the big guns.
Where to From Here?
So, who wants to be a billionaire? The charismatic Ellison, who has made waves in the past by rattling Bill Gates and coveting Apple Computer (Nasdaq:AAPL -
news) , needs not apply. His 24% stake in Oracle was worth a cool $26 billion at last week's peak.
The balance sheet is also a winner, with a cash stake of $2.7 billion.
Oracle has achieved phenomenal sales growth in the past. Earnings have also kept pace -- 35% annually over the last five years -- despite 1998's flat showing. With
shrewd bottom-line management, it's not too much of a leap of faith to assume that the bottom-line growth will probably beat out the top line in the near term.
Projections currently call for the company to earn $1.06 per share this fiscal year (which ends in May), and $1.31 next year. While earnings growth of 23.6% makes
it hard to justify today's rich P/E multiple, it could be considered a relative bargain when one considers Cisco Systems, and the valuation is in line with other top
Internet players like server maker Sun Microsystems (Nasdaq:SUNW - news) .
Oracle knows all. Information will continue to be the critical e-business driver. The company recently announced an agreement with Ford (NYSE:F - news) to
develop an online supply chain management system connecting the automaker with its suppliers. It is this kind of system that can provide big cost-savings in the
corporate world.
The Internet is here to stay and so is Oracle. Larry, you can put down the butter knife. You're not toast. "
How much direct competition is DCTM getting from Oracle and is DCTM a buyout candidate? |
