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Oracle Corporation is the world's largest maker of database management systems (DBMS), software that allows users to create, retrieve, and manipulate data in computer-based files. Main products support ORACLE, a relational DBMS. 2004 revenues as percent of total: New software licenses, 35%; software license updates and product support, 44%; services, 21%. '04 dep. rate, 8.8%. Foreign sales 57%, profits 46% of total. R&D: 13% of '04 sales. Has 41,660 employees, 26,515 stockholders of record.
Oracle finally won its battle to acquire PeopleSoft. In June, 2003, Oracle bid $16.00 a share for its rival. After raising its offer several times and winning a court duel with the Justice Department, which tried to block the bid, Oracle gained the support of a majority of PeopleSoft's shareholders in a vote in November. Finally, in December, PeopleSoft's board agreed to an offer of $26.50 a share in cash, a total of approximately $10.3 billion. Oracle completed the acquisition on January 7th.
Oracle is moving quickly to integrate PeopleSoft. It plans to cut about 9% of the combined workforce, a total of some 5,000 jobs. Oracle has announced that it intends to enhance the current versions of PeopleSoft's programs, and to develop new versions, so it will retain the majority of PeopleSoft's developers. Oracle also plans to retain a large proportion of PeopleSoft's sales staff. All told, Oracle expects the deal to be accretive to earnings (on a GAAP basis) starting in fiscal 2007.
Meanwhile, operations continue to do well. The improving economy is spurring demand, and a reorganization of the salesforce into two groups, one concentrating on database technology and one focused on applications, seems to be helping to boost sales. A big focus now, though, will be on keeping as many PeopleSoft customers as possible, since one of the main rationales (along with cross-selling products) for the PeopleSoft acquisition was the lucrative maintenance contracts that existing customers typically sign year after year. Rivals already have started trying to poach the business, but current customers may be loath to change vendors, given the complexity and costs associated with switching software. Ultimately, Oracle intends to develop a merged version of its and PeopleSoft's applications, with an easy migration path to the new product, but it probably will be at least three years before that occurs. Assuming some degree of success, and that the company continues to win new business, look for share net to grow at a good annual pace through the latter years of this decade.
Overall Buy signal. If you have free cash in hand, 1-3 years return will be 50%. I will predict $17-$20 for the next 3 years. Of course shorterm attractive due to NAZ downside. The market will pick up in the next couple of weeks and the Tech sector will do well, short term target for ORCL is $14
-------------------- Disclaim: I don’t guarantee the accuracy of the information I post. All my posts are based on my own research. I am not a registered investment advisor and therefore I am not qualified to give you any investment advices. You Make Your Decision! Posts: 389 | Registered: Mar 2005
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