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Oracle Q2 figures due

This announcement from the Oracle Corp on Wednesday – after the closing bell – will be the first quarterly update since Larry Ellison stepped down as CEO.

Oracle logo
Source: Bloomberg

Mr Ellison was at the helm for 37 years, and will remain an influential figure at the company; he now holds the role of chairman and chief technology officer (CTO). Safra Catz and Mark Hurd have taken over as joint CEOs.

The new management structure has an unconventional reporting line, with Mr Hurd running sales and global business units, while all finance, legal and manufacturing will report to Ms Catz. Mr Ellison will oversee all hardware and software engineering functions.

The new management setup may be unorthodox but it allows board members to focus on their area of expertise. It is no surprise that Mr Ellison is retaining control of the technology division, and a part of me feels he doesn’t want one individual to have entire control of the firm as he holds a 25% stake in it.

Through a string of takeovers during the past decade the company now offers a wide range of services and software products to large corporations.

Oracle holds a strong position in the database management system software market, and according to Gartner spending on IT infrastructure will increase by 16% in the next five years.

Cloud computing has become more sought after by clients and Oracle has ‘upgraded’ its platform. Mr Ellison has vowed to match Amazon and other providers of cloud computing in terms of price and service. As this is a growth sector and competition is intensifying traders will be particularly interested in this division.

Oracle will release its full-year figures in June 2015, and traders are expecting revenue of $39.59 billion and EPS of $3.03. These forecasts equate to a 3.3% rise in revenue and a 5.5% increase in EPS.

Q1 results were slightly lower than expected. Revenue came in at $8.59 billion and EPS was $0.62, while the market was anticipating $8.78 billion and $0.64 respectively. The company will report its Q2 numbers on Wednesday 17 December, and traders expect revenue of $9.49 billion and EPS of $0.68. Last year’s Q2 revenue and EPS were $9.3 billion and $0.69 respectively.

Equity analysts are bullish on Oracle and out of the 47 recommendations, 26 are buys, 17 are holds and four is a sell. The average target price is $44, which is 7% above the current price. Investment banks are slightly less bullish on Microsoft, of which there are 24 buy recommendations, 19 hold ratings and four sell recommendations. The average target for stock is 7.5% above the current price.

Since the Q1 figures were announced the number of short positions on the stock has increased by nearly 18%.

The stock has been rangebound over the past few months, and any move to the downside is likely to find support at the $38 level; a positive quarterly update could push the stock to $42.

Oracle Corp is available for extended hours trading.

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