Interesting article on ORCL by Mark Anderson at www.tapsns.com
Oracle Numbers
Other than its stock runup, defused by the (now-untimely) release of its financials over two weeks ago,
why mention these aging numbers now? Well, there are a couple of reasons. But first, let's get them behind
us: Oracle showed Q2 net income up 40%, from $274.1MM to $384.5MM YTY; revenues were up 13%, from
$2.05B to $2.32B. Pretax margins were up to 25% from 18% in Q1, with core database software up 17% and
applications up 31%.
Given flat (declining) revenues in Q1, and not flat (really declining) net income over the same period, it's
easy to see why those automated buy programs inside the brains of the guys who sit in front of the Sun
machines on Wall St. might have all gone off at once sometime in November (when the stock took off).
Why November instead of December? I am guessing that November was when some of those smart
physics grads on the Street started to realize that the Y2K thing was about over, and that sales not
showing up in Q1 would show up in Q2, while those being put off by corporations till year end would all
pile up in Q3.
Want to bet that's how it will play out?
Of course, one way of betting is to buy and sell stock, and Oracle insiders appeared to be unloading a
boatload of it first thing yesterday morning. If they weren't cashing in after the long drought, perhaps they
were moved by the announcement by CEO Larry Ellison a couple of days after the earnings report that he
was cutting prices on the core db software by 40-50%.
Don't tell me you're confused, too?
Despite the quick runup and the insider selling, I think Oracle is going to ramp up even faster, using the
price cuts to drive sales on its higher-margin applications, where it fights SAP, Siebel, and others. By
taking costs out of the company, moving sales and support online, pushing on the Oracle 8i Internet
version for the coming wave of clicks and mortar conversions, and generally running toward the direct B2B
business model it is selling others, the company has a chance to double up on the windfall sales it is
already in line to pick up in the short term.
Of course, there is always that little issue of Microsoft, now shipping (to production) NT2000, which is
wedded to SQL 7, Larry's nemesis, for those of you wondering why anyone would leave money on a
well-defended table. This is a pre-emptive price cut, but one that makes sense.
Oracle should do well over the next 12-24 months.
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