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Is Oracle Corporation (ORCL) Just Another Cash Cow?

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Oracle (ORCL)A week ago, Oracle Corporation (NASDAQ:ORCL) reported quarterly results that missed analysts’ estimates by a small margin. The shareholders reacted negatively, and the company’s shares dropped by 9.3% the following day. To help, the company has announced cloud computing deals with some of its biggest rivals.

Earnings

The computer hardware and software company’s sales remained largely flat, showing an increase of just 0.3% from the same quarter last year to $10.95 billion, which were below analysts’ estimates of $11.12 billion. Oracle Corporation (NASDAQ:ORCL) sales improved by just 2.4% in the Americas region, remained flat in Europe, Middle East & Africa (EMEA) and performed poorly in Asia Pacific, particularly China and Australia. Investors have been concerned regarding the slowdown in the company’s growth, and the current results have done little to allay those fears. On the other hand, the company’s adjusted earnings of $0.87 per share, a year-over-year increase of 5%, were in line with estimates.

GEOGRAPHIC REVENUES IN MILLIONS
Q4-FY2012 Q4-FY2013 % Change
Americas $ 5,771Mn $ 5,911Mn +2.4%
EMEA $ 3,314Mn $ 3,328 Mn +0.4%
Asia Pacific $ 1,831Mn $ 1,708 Mn -6.7%

Oracle Corporation (NASDAQ:ORCL) has also increased its quarterly dividend by 100% to $0.12 per share. While a step in the right direction, I believe that this won’t be able to lure investors as the stock still gives a yield of just 1.59% and is considerably below the 2.68% offered by its rival Microsoft Corporation (NASDAQ:MSFT).

Microsoft Corporation (NASDAQ:MSFT) has made significant progress in its non-PC operations, particularly in cloud computing. It could become a better organization by making necessary changes on the management front with its current restructuring. Due to the weakness in PC market, however, I don’t consider Microsoft as an attractive investment option at this time.

Sluggish growth

Since the beginning of the calendar year 2012, the best growth figures Oracle could manage was just 3.43% for the three months ending Nov. 2012; this is significantly below the growth witnessed by some of its rivals such as Microsoft or salesforce.com, inc. (NYSE:CRM) in the same period. The world has embraced cloud computing, leaving Oracle Corporation (NASDAQ:ORCL) behind. The company is now playing catch up with the enterprise software-as-a-service (SaaS) market by forming partnerships with its rivals, which I believe are essential for Oracle’s both long and short-term survival.

NASDAQ to NYSE

There was some good news for Oracle’s investors, however. The company has a $12 billion share buyback program and it will also be moving to NYSE from NASDAQ in a few days. I believe this is a positive since NYSE is considered the home of the more internationally-focused blue-chip stocks. Without giving any specific reasons, Oracle Corporation (NASDAQ:ORCL)’s management has said that the move is “in the best interests of its stockholders, customers and partners” and I am inclined to believe that.

Cloud deals: Who wins?

Following its earnings release, Microsoft Corporation (NASDAQ:MSFT) (the maker of SQL Server) and Oracle (the maker of the new public cloud services focused 12c database) officially announced an enterprise partnership. The 12c is SQL’s biggest competitor. According to the terms of the deal, two of Microsoft’s biggest corporate computer networking services, Windows Server Hyper-V virtualization software and Windows Azure, will support some of Oracle’s key software. I believe that the deal not only works well for Oracle Corporation (NASDAQ:ORCL), but is a big win for Microsoft as well. With Oracle on board, Microsoft’s services will become more attractive for customers, especially since its bigger and smaller open-source rivals have been giving it a tough time.

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