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

To: myicon who wrote (10417)	4/8/1999 10:34:00 AM
From: zc66	Read Replies (2) \| Respond to of 19079

Oracle's pipeline for Q4 healthy Story --SUMMARY:--Oracle Corporation--Server & Enterprise Software Shares of Oracle were weak yesterday in concert with the rest of the enterprise software sector, based upon industry fears about Year 2000 and a software purchasing slowdown. On a near term basis, we see no catalyst for change in negative investor sentiment with respect to the software space. On a longer term basis, we do believe that the weakness does present a buying opportunity. However, there may be even a better buying opportunities going forward. Our sense continues to be that the pipeline of business for Oracle's fourth fiscal quarter looks good. IT managers may increasingly open their wallets as we move through 1999 and we also continue to believe that Oracle has an excellent Internet strategy. Maintain Buy rating. --EARNINGS:----------------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 05/98 EPS $0.10A $0.12A $0.14A $0.27A $0.64A Previous 05/99 EPS $0.13A $0.19A $0.20E $0.37E $0.88E Current 05/99 EPS $0.13A $0.19A $0.20E $0.37E $0.88E Previous 05/00 EPS $0.16E $0.21E $0.24E $0.44E $1.07E Current 05/00 EPS $0.16E $0.21E $0.24E $0.44E $1.07E Previous 05/01 EPS $N/A $N/A $N/A $N/A $N/A Current 05/01 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: EPS are fully diluted. --FUNDAMENTALS:------------------------------------------------------------- Current Rank........:1-H Price 04/07/99......:$21.44 Prior Rank..........: Target Price........:$47.00 P/E 05/99...........:24.4X 52 Wk Price Range...:40.50 - 12.70 P/E 05/00...........:20.0X Proj. 5yr EPS Grth..:22.0% Return on Equity 98.:38.10% BookValue...........:$4.07 LT Debt-to-Capital..:9.17% Dividend............:$0.00 Revenue 1999........:$8878.00 mil Yield...............:N/A% Shares Outstanding..:1475.00 mil Convertible.........:No Mkt. Capitalization.:$31624.00 mil Hedge Clause(s).....: Comments............: --OPINION:------------------------------------------------------------------ Oracle Shares Weak Along with the Overall Software Sector Shares of Oracle were not exempt from the drop in the software sector over the last few trading sessions. Fears of a slowdown or "freeze" of software spending leading up to the turn of the new millennium has hit shares of the software sector hard so far this week. Information technology managers seem reluctant to initiate new IT projects that require extensive outlays of dollars and personnel in fear of finding themselves lacking the adequate resources to fight any Y2k fires that may arise as Y2000 approaches. Many IT managers would also prefer to maintain a "clean" Y2k compliant environment and may refrain from introducing any new code into their systems which could disturb the status quo. Consequently, some software vendors who sell to these compa nies are apparently seeing their revenue lines take a beating. Recent Y2k-related preannouncements from a number of companies in the software space have seemingly spooked investors, many of whom have made a dash to the doors. Shares of Oracle have been no exception. Promising Product Line Should augur Well for Oracle Oracle is increasingly viewed as an Internet and e-commerce infrastructure play. As more and more companies find themselves with an Internet presence conducting more and more e-commerce transactions, software to facilitate the e-commerce process is needed that is both reliable and scalable. Oracle's database products fill this need. In that it is almost impossible to predict the number of visitors a particular web site may draw at a particular time, corporate customers that can not afford any downtime need a product that is capable of handling a huge number of simultaneous transactions. Oracle's database products have a reputation of reliability and scalability and can be found at the back-end of many of the busiest corporate e-commerce sites. Oracle8i, the company's latest database offering, is especially suited to work with the Internet as a back-end to E-commerce oriented systems. Our sources also continue tell us that Oracle's application business is seeing a resurgence even amidst the sharp downfall of other enterprise application vendors. In Oracle's previous quarter, the company did report weaker than expected application revenues, but compared to many of the other enterprise vendor,s who experienced a year-over-year decline in application license revenue, Oracle's numbers looked impressive. The company did, however, have a much easier year-over-year compare. Negative Investor Sentiment Weighing on the Software Sector The near-term may be difficult for the entire enterprise software space. We have been unable to determine a near-term potential catalyst for change in the negative sentiment among potential investors of enterprise software companies. We, however, believe that at this stock level, Oracle shares are indeed a prudent play for long-term investors willing to look through the Year 2000 macro issue. However, it would be imprudent for us to say that the downward pressure on enterprise software stocks is over, given the concerns about Y2k and the high level of uncertainty with respect to prospects for the second half of the year. Pipeline of Business Appears Healthy -- Maintain Buy Rating Our sources continue to tell us that Oracle's future pipeline of business for the fiscal fourth quarter looks strong. As the role of e-commerce expands in the corporate world, we expect Oracle to be a big, indirect beneficiary. Although Oracle did have difficulty converting its pipeline last quarter into sales, as CIOs become more confident of where they stand with respect to Y2K, they are likely to begin opening their pocketbooks much wider with respect to software purchases. Longer term, we believe shares of Oracle will prove an astute investment and consequently are maintaining our Buy rating. -------------------------------------------------------------------------- Salomon Smith Barney is a U.S. registered broker-dealer. It is a member of Citigroup Inc. and is affiliated with Citibank, N.A. and its subsidiaries and branches worldwide (collectively "Citibank"). 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