Oracle Expectations Differ From Analysts & Ellison (ORCL)

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After the close of trading today, Larry Ellison & Co. is set to report earnings for Oracle Corp. (NASDAQ: ORCL).  Thomson Reuters (First Call) has earnings estimates of $0.34 EPS on $5.84 billion in revenues.  Be advised that this number is actually under where the company put its own targets and is down from $0.35 EPS estimates just two months ago. 

Estimates for the coming quarter are also expected to be $0.34 EPS on$5.84 billion in revenues.  For its fiscal year-end May-2009, estimatesare $1.46 EPS and $5.84 billion in revenues.

Despite the drop in the shares and despite the stock only being about10% of its 52-week lows, Oracle has held up far better than many othertechnology and enterprise stocks.  Shares are up less than 1% at$16.90, and the 52-week trading range is $15.10 to $23.62.

We expect many traders and investors to look for what Ellison iswilling to say about future mergers.  He has said that he would like touse the weak environment to make bolt-on acquisitions.

Options are set to expire tomorrow, but it appears that options tradersare braced for a move of up to $0.55 in either direction. 

Analysts have been bringing down their targets and expectations.  Itlooks like the average price target is roughly $21.00 from those wefollow.

There is one sort of odd notion here compared to the past.  Most havenot taken Ellison at his word on guidance.  The street is under the company’s outlook, and now there is talk that if his guidance is not lookingfor a downward trend that it won’t be believed.  In short, there is ahigh degree of confusion over how to evaluate Oracle ahead.  SAP guidedlower.  Microsoft has been cautious.  And there is this recession andtech-spending slow-down.  But IBM has maintained its estimates, at least for the most part.

Stay tuned.

Jon C. Ogg
December 18, 2008