Oracle Still Looks Like a Smart Buy
First, the database giant surprised the entire sector with its $2.1 billion acquisition of Acme Packet
Although the Tekelec announcement didn't push the needle in terms of media attention, the move nonetheless demonstrates how serious Oracle is to differentiate itself from cloud rivals including Salesforce.com
Given Tekelec's mobile traffic handling capabilities, Oracle now has ways to leverage Acme Packet's existing strengths in data control to service the needs of large telecom giants including Verizon
However, this has not stopped the Street from harping on Oracle's third-quarter earnings disappointment, which immediately sent the stock tumbling down 8% in March. Management said then the miss was due to struggles with sales execution. The company had hired new salespeople in the preceding quarters, many of whom struggled to close deals, resulting in the 1% revenue decline.
It wasn't a good quarter, but Oracle's management didn't pretend it was, either. It's also worth noting here that the third quarter is historically Oracle's weakest. It certainly didn't help that the government cuts known as the sequester fell into that quarter. Investors, spooked by the results, sold off the stock fearing Oracle's near-term outlook despite margins remaining intact.
Investors also discounted that Exadata, Oracle's intelligent storage server solution, which rivals competing products from EMC
The Street is looking for a much improved performance. The consensus estimate is for earnings of 87 cents per share on revenue of $11.12 billion, which would represent revenue growth of just over 1%. These numbers seem very conservative to me, however. If my suspicions are correct that customers had postponed orders in the third quarter, I expect these orders will manifest themselves during this upcoming announcement.
I'm not suggesting this will be a slam-dunk quarter. But I don't anticipate Oracle will have similar issues with closing deals, given the recent positive results and upbeat guidance provided by Cisco.
With that in mind, I would be a buyer of Oracle shares ahead of the earnings report. I don't believe the current share price truly reflects Oracle's long-term value.