Oracle Weighs on Application Software Stocks (ORCL, MSFT, SAP, MITK, BSFT, VRSN)

Software giant Oracle Corp. (NASDAQ: ORCL) is trading down about -2% in the early afternoon today following a research note from JMP Securities that maintains the firm’s ‘market perform’ rating, raises Oracle’s EPS estimate for the company’s fourth fiscal quarter, and holds Oracle’s full-year EPS estimate at $2.63. But there are risks that include a possible re-organization, another drop in hardware sales, and uncertainty around the financial crisis in Europe.

Oracle and Microsoft Corp. (NASDAQ: MSFT) combine for about two-thirds of the market cap in the applications software industry, and when SAP AG (NYSE: SAP) is added in, the three companies combine for more than 73% of the market cap. So nice gains today by Mitek Systems Inc. (NASDAQ: MITK), BroadSoft Inc. (NASDAQ: BSFT), and VeriSign Corp. (NASDAQ: VRSN) kind of get swallowed up.

Mitek is up more than 9% following the appointment this morning of a new senior vice-president for sales and business development. Mitek develops mobile imaging software that allows consumers to use mobile device cameras to perform some banking operations by taking pictures.

BroadSoft is up more than 6.5% on Nomura’s reiterated ‘buy’ rating, even though the bank lowered the software maker’s target price from $54 to $35.

Verisign is up more than 3% on no news.

Oracle’s hardware sales are probably the biggest drag on the company’s share price. Sales of the hardware that came with the acquisition of Sun Microsystems has never lived up to expectations and is expected to fall another 15%-25% in Oracle’s current fiscal year. Software licensing fees are expected to rise enough to keep earnings at expectations, but one wonders how long Oracle will put up with the hardware losses.

JMP Securities also suggest that executive vice-president Keith Block may be about to depart. Several of Block’s instant messages were disclosed during the recent litigation with Hewlett Packard Co. (NYSE: HPQ), and the revelations did nothing to help Oracle’s case.

Oracle’s shares are down about -2% at $27.13 in a 52-week range of $24.72-$34.13. Shares of Microsoft are also down about -0.6% at $29.84 in a 52-week range of $23.79-$32.95.

Paul Ausick