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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: grogger who wrote (7152)	5/20/1998 1:51:00 AM
From: Neil H	Read Replies (2) \| Respond to of 19080

Here are some exerps from an article from Barons online: Weekday Trader Microsoft's Bitter Rivals Could Gain from Suit Lisa R. Goldbaum Since the Justice Department and attorneys general of 20 states filed their landmark antitrust lawsuit against Microsoft (MSFT) Monday, discussion has centered on the Redmond, WA-based software giant's alleged attempt to control consumers' access to the Internet. Much of the dispute concerns whether Microsoft has bundled its Internet Explorer Web browser into the company's dominant Windows operating system, which sits on nine out of every ten personal computers in the world today. Not surprisingly, the loudest cheers over the government's actions have come from Netscape Communications (NSCP)--which produces the archrival Netscape Communicator Web browser and probably stands to gain the most from the government's direct intervention. But Netscape isn't the only one likely to benefit from what may well turn out to be a long war between the government and Microsoft. Some industry pros say two of Microsoft's biggest rivals, Oracle (ORCL) and Sun Microsystems (SUNW)--whose chairmen Larry Ellison and Scott McNealy appear to have a bottomless loathing of Microsoft's Bill Gates--may be poised to reap competitive rewards as well, particularly in the lucrative enterprise server market, where Microsoft has come on strong. Now that the floodgates have apparently been opened for unbridled scrutiny of Microsoft's business practices, these companies--many of which have been griping about Microsoft for years--may be dealing with a more cautious competitor going forward. "It will be harder for Microsoft to replicate [its] past behavior," argues Dave Vellante, an analyst with International Data Corp. "All companies with business models successful enough to compete against Microsoft should benefit." That could be good news for a company like Oracle, whose fierce battle with Microsoft in the database market has cast a shadow over the company's earnings growth prospects and its stock price--even though Oracle's database software products are considered superior to Microsoft's SQL Server by many industry experts. Josephthal & Co. analyst Bert Hochfeld points out that Microsoft has been waging an intense price war in the enterprise database market, underpricing SQL Server by as much as 80% below what competitors charge in order to gain share. With the heightened scrutiny of Microsoft's business practices likely to emerge in the lawsuit's discovery process, Hochfeld thinks serious questions could arise over whether the company uses profits from its monopoly Windows operating system business to cover losses in its database software and other server applications--where Microsoft is trying to gain market share. That practice, known as cross-subsidization, is illegal under antitrust law, Hochfeld asserts. "Practices they have used against Oracle are going to come to the fore" if Microsoft allows the case to drag on, Hochfeld contends. A Microsoft spokesman vehemently denied that the company uses profits from Windows to subsidize other, money-losing products. Whether Microsoft will make substantial changes in its business practices is still unclear, but it could make the company more cautious about raising any more red flags with the government. That could provide some relief to Oracle, whose stock has been on a rollercoaster ride during the past year or so: Though it was over 40 last August, it now hovers at around 26. At these levels, the shares change hands at about 22 times the $1.16 per share analysts tracked by Zacks Investment Research predict the company will earn in the fiscal year ended May 1999--a slight discount to Oracle's projected earnings growth rate for that year of about 25%. A principal reason for the stock's tepid performance: fear of Microsoft......... ..... But if the government's lawsuit manages to make Gates and his crew look over their shoulders a bit more before sticking it to their competitors, companies like Sun and Oracle may finally get the "level playing field" they've been demanding for some time. Regards Neil