Very well written article from wsj;
(ps, I noticed wsj articles have been improved a lot lately, imho.)
Oracle Officials Promote E-Commerce
As Company's Share Price Rebounds
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
Oracle Corp. shares have been on a roll, reflecting a higher visibility of the company as a provider of electronic-commerce tools -- and a concerted effort by Oracle executives to promote that idea.
In select presentations and interviews over the last few days, officials at the Redwood Shores, Calif., business-software company have been extolling the roles that Oracle's technology is playing at a growing number of Internet companies. The drumbeat is likely to reach a crescendo Tuesday in Los Angeles, where the company is hosting its semiannual analysts meeting.
Oracle stock has risen by roughly 35% in the last month, reaching all-time highs, including a bump in the last few days following presentations by key company executives. The shares closed Monday at $64.0625, down $1.0625, in 4 p.m. Monday Nasdaq Stock Market trading.
Among the briefings: a conference call Friday, hosted by Goldman Sachs Group Inc., in which Oracle President Ray Lane talked about a recent big Oracle deal with Ford Motor Co. and hinted that more such deals may be in the works. In trading Friday after the call, Oracle's shares rose 5%.
While Oracle and its chairman, Larry Ellison, have never been known for being bashful, analysts say they have been hearing even more from the company in recent weeks. "They have gotten more visible of late," said Melissa B. Eisenstat, with CIBC Oppenheimer.
So is Oracle talking up its stock?
No, said Gary Bloom, Oracle's senior vice president for system products. "We are trying to educate the marketplace about the phenomenal position of our software and technology for e-business."
The company has been forced to do that because it has watched with envy as other companies, including Cisco Systems Inc. and Sun Microsystems Inc., have parlayed a supplier role for the Internet into stratospheric Wall Street valuations. Oracle executives say they have as much of a claim to being a crucial dot-com supplier as anyone else, because the company's flagship database software is used by most of the world's biggest Web sites. Yet investors put the company in a different category from the likes of Cisco, giving Oracle just half of the networking-equipment company's price-to-earnings ratio.
Of course, many of the reasons that Oracle isn't a blue-chip Internet stock are of its own making. Unlike Cisco, which has beaten analysts' consensus per-share earnings expectations by exactly one penny for nine quarters in a row, Oracle has reported uneven earnings; it disappointed Wall Street in two quarterly reports this year alone.
What is more, the company is in a tough fight in its key database business with two technology powerhouses: International Business Machines Corp. on the high end and Microsoft Corp. on the low end. Oracle has been forced to offer deep discounts to major database customers, as an internal Oracle document accidentally faxed to this newspaper in September made clear. And IBM has scored big with customers with its highly successful e-business ad campaign; Oracle said it will soon start responding with a $100 million ad drive of its own.
Mr. Bloom conceded that earnings statements at the company have been volatile. But he said that "if you look at the trends for revenue, we do very well. And I don't think we have ever been in a better position than we are now."
'The Hearts and Minds'
That fact that Wall Street now better appreciates Oracle's role in the online world is tribute to the company's increasing success at managing perceptions about itself in a somewhat fickle stock market. Even though Oracle's business is today essentially the same as it was six months ago, "right now it is considered a great Internet infrastructure play," said Ms. Eisenstat. "That has the hearts and minds of investors."
Oracle gets roughly half its software sales from its database products, used to store information such as customer accounts, and the other half from software packages used to run such corporate functions as accounting. Oracle also has an extensive consulting operation, which help customers get its fairly complicated products up and running. Indeed, just a few months back, Oracle was included in the ranks of companies that supplied "ERP," or "enterprise resource planning" software -- a sector in the Wall Street doghouse because of slow sales and concerns over the 2000 computer bug.
Just 10% to 15% of Oracle's revenue is related to the dot-com world, estimates Christopher C. Shilakes of Merrill Lynch. Some of the changed perceptions at Oracle involve deft use of marketing pixie dust. For example, the company appended the letter "i," for Internet, to the name of its Oracle 8 database product, though most of its uses are for stodgy applications at bricks-and-mortar businesses.
A Hot Trend
But the company has also increased its presence in the online world. As part of the recent deal with Ford, for example, Oracle will be helping the auto giant bring its supply chain onto the Web. Oracle is also developing its "application outsourcing" business; under it, Oracle runs the software for a customer as a service for a monthly fee, rather than selling the customer a copy of the program. It is one of the hot trends in the technology world, and Oracle's competitors, including SAP AG of Germany, are jumping into the business.
Mr. Shilakes said that while a small part of Oracle's business is due to the Internet right now, its strong position with established businesses put it in a good position to be chosen as a technology supplier as those companies build their e-commerce businesses.
Oracle, of course, agrees; that is one reason the company will give an upbeat forecast today to analysts. Among the highlights expected of the presentations: Mr. Bloom said he does not expect a Y2K slowdown later this year, and that the company is making progress in using its own technology to trim roughly $500 million a year in operating expenses.
It is a message analysts said they would like to believe, though there is a lingering once-burned, twice-shy feeling. Ms. Eisenstat admitted she was sometimes nervous of recommending Oracle because of its sporadic earnings. But Mr. Shilakes, a longtime bull on the company, said Oracle's long-term trends are good, despite the occasional bumps along the way.
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