According to independent tech research firm 451 Group, SAP (NYSE: SAP) has been trying to sell off its TomorrowNow division since January. Unfortunately, there were no bidders. As a result, SAP has decided to shut down the business.
SAP purchased TomorrowNow in 2005. It looked like a smart deal. After all, the company developed systems to make it easier to use alternatives to Oracle (NASDAQ: ORCL)'s maintenance customers (known as the Safe Passage Program).
So why the dearth of interest for TomorrowNow? Well, Oracle filed a lawsuit against the company in March 2007. The allegation was that TomorrowNow made improper downloads from Oracle's servers.
No doubt, such a thing can be scary for any possible suitor.
The irony is that TomorrowNow customers – which amount to about 225 – will probably have no choice but to return to Oracle.
After hitting a one-year low of $18.18 in February, the stock hit a one-year high of $23.57 in June. ORCL opened this morning at $20.89. So far today the stock has hit a low of $20.65 and a high of $21.20. As of 1:15, ORCL is trading at $21.14, up 37 cents(1.8%). The chart for ORCL looks bearish and steady, while S&P gives the stock its highest 5 Stars (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $18 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.1% return in just two months as long as ORCL is above $18 at September expiration. Oracle would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
ORCL hasn't been below $18 at all in the past year and has shown support around $20 recently. This trade could be risky if the company's earnings (due out in mid September) come out before expiration and disappoint, but even if that happens, this position could be protected by the support the stock might find at its year low, which is just above $18.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent owns and controls positions in ORCL and IBM.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
I've said it before: the second quarter is going to be the inverse of the first. Expectations going in were simply too high.
What I find interesting is that Oracle (NASDAQ: ORCL), Red Hat (NYSE: RHT) and Research In Motion (NASDAQ: RIMM) have all taken down guidance due to the sluggishness they're starting to see in their businesses.
What the Street seems to be ignoring is that the dollar has been crushed for over a year now, which means that the currency tailwind is only getting weaker as the year drags on. If one uses $1.55 euro per dollar as a benchmark, the second-quarter effect was a 14% year-over-year currency tailwind.
In the third quarter, that drops to 10%; in the fourth, it will drop to 5%. Add in macroeconomic headwinds -- along with the fact that credit markets have been pushed back into a state of mild panic -- and it's a surefire recipe for a very tumultuous back half of the year.
I'm looking hard for reasons to be optimistic, but they seem to be thin on the ground. In the information technology (IT) sector, at least, we'll likely see a meaningful budget flush at the end of the year - if only because they'll be cut in a big way starting in 2009. This means that IT managers, if they even think they might need anything over the next year or so, need to use or lose whatever's left in their 2008 budgets come the fourth quarter.
This will create an environment where people will be calling the bottom for IT in the fourth quarter - but it's more likely to be the last hurrah before the bottom drops out.
The Dow Jones Industrial Average is down 150 points (at 10:15 a.m.). I guess that it was to be expected as we woke up to news that Goldman Sachs (NYSE: GS) downgraded investment banks. Wall Street is also worried about the outlook for tech stocks after both RIM (NASDAQ: RIMM) and Oracle (NASDAQ: ORCL) reported quarterly results Wednesday, giving a tepid outlook.
Then, final revision of first quarter GDP were released an hour before the open, and while growth was revised upward to 1% from an anemic 0.6% original estimate, the components weren't very encouraging. Consumer spending, which accounts for 70% of GDP, grew by 1.1%, the smallest gain since the second quarter of 2001, which was during the last recession. Also, corporate profits after taxes fell 7.8%, a higher decline than previously estimated. Housing, as measured by residential fixed investment plunged by 24.6%.
Also, looking at inflation, the price index for gross domestic purchases, a closely watched measure of inflation, rose at a 3.6% rate, up 0.1 percentage point from the preliminary estimate. Excluding food and energy, the price index was up 2.3%, which is above the Fed's preferred range of around 1.5% to 2% for that index.
One bright spot, as it has been awhile now, is that exports rose 5.4%, which was much better than the estimate of 2.8 percent in May.
Moving to the labor markets, weekly initial claims, which were also reported at the same time, were unchanged. But -- and a big But it is -- the better indicator, four-week average of new jobless claims, was at the highest level since October 2005 in the aftermath of Hurricane Katrina.
Yup, that pretty much sums up Oracle Corp. (NASDAQ: ORCL)'s recently delivered quarterly results. Strong. So strong, one could forget there is a slowdown in economic activity. So strong, no one remembers now Oracle's previous quarter scare (that the weak economy indeed would affect it and tech stocks). So strong, it has surpassed International Business Machines (NYSE: IBM) to become the second-largest software company in sales. It is no wonder then that the stock climbed 1.86% in after-hours trading to $22.97. It closed at $22.55.
By the numbers, Oracle's profit jumped 27% to $2.04 billion, or 39 cents a share, but excluding acquisition costs and some other expenses, profit rose to 47 cents a share. Revenue rose 24% to $7.28 billion. Oracle beat analysts' estimates on both counts. And this is just the tip of the iceberg; the results showed strength and improvement in many areas:
New software sales in the U.S. grew 22% and overall sales in the Americas, where the U.S. dominates, grew 18% after declining last quarter. Doesn't look like companies are cutting too much spending on software, does it? Keep in mind, growth in the region was indeed slower.
The segment that competes with SAP jumped 36% - a good example of Oracle's ability to bounce back.
Sales of new software licenses climbed 27% - it's amazing how Oracle managed to turn the trend on this number that concerned investors so much in the previous quarter. If that's not a good sign for future sales, what is? And if that doesn't give confidence in management and strategy, what does?
Operating margin for the quarter was 48% - better than Microsoft (NASDAQ: MSFT)'s, and that says it all.
The company, known for its acquisition strategy, closed its $8.5 billion purchase of BEA Systems Inc. in April. The acquisitions didn't just allow Oracle to grow to its second place, but gave it a diversity of products that helps it with sales and crossover sales.
One caveat: This quarter has always been known to be Oracle's best one. Still, the numbers don't lie, and this is one company that has been more than consistent.
Oracle (NASDAQ: ORCL) is scheduled to report Q4 EPS on June 25.
Friedman Billings says: "Our checks suggest ORCL benefited from strong seasonal trends that enabled the database business to put together strong results and the applications business to bounce back nicely."
ORCL July option implied volatility of 38 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Oracle (NASDAQ: ORCL) shares are falling today after the company announced it has agreed to buy Skywire Software, a software business that helps insurers manage policy sales and processing. Terms of the deal were undisclosed. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ORCL.
After hitting a one-year low of $18.18 in February, the stock hit a one-year high of $23.57 earlier this month. This morning, ORCL opened at $22.31. So far today the stock has hit a low of $21.83 and a high of $22.41. As of 12:45, ORCL is trading at $21.90, down 0.20 (-0.9%). The chart for ORCL looks bullish and steady, while S&P gives the stock its highest 5 Stars (out of 5) Strong Buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $25 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in three months as long as ORCL is below $25 at September expiration. Oracle would have to rise by more than 13% before we would start to lose money. Learn more about this type of trade here.
ORCL hasn't been above $23 at all in the past year and has shown resistance around $23.50 recently. This trade could be risky if the company's earnings (due out on 6/25) are a positive surprise, but even if that happens, this position could be protected by resistance ORCL might find around $23 where the stock topped out earlier this month.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ORCL.
Not many software companies can survive 30 years. But, that's what Oracle (NASDAQ: ORCL) has been able to do.
In fact, according to a cover piece in Barron's [a paid publication], it looks like the company may be poised for continued success.
The company's CEO and co-founder, Larry Ellison, is a legend in the software business. He has battled with biggies like IBM (NYSE: IBM), SAP (NYSE: SAP) and Microsoft (NASDAQ: MSFT). He has also conquered a variety of database operators.
But, Ellison has also been bulking up his company with savvy acquisitions, such as PeopleSoft, Siebel and BEA Systems (spending over $30 billion on dealmaking since 2005). Basically, he believes that business software is a fairly mature business and needs consolidation. What's more, the business is highly sticky. That is, once you implement an ERP system or database platform, it's pretty tough to make a change.
So far, the results have been solid. Over the past year, operating margins have gone from 36% to 42%. Then again, Oracle has benefited from economies of scale, such as with R&D, sales, customer support, and so on.
What's more, Oracle has lots of cross-sale opportunities. In fact, software licenses are up 29% to $4.4 billion. Keep in mind that this will be a source of future growth because of the ongoing maintenance fees.
A newly published report by Standard & Poor's said that the performance of organizations such as Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, and Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac, could directly affect the U.S. economy and the country's credit rating, especially if they have to be rescued by the government, according to the Wall Street Journal's "Credit Markets" column.
Seagate Technology LLC (NYSE: STX), a hard drive maker, filed a patent infringement suit in San Francisco against STEC Inc (NASDAQ: STEC) over four patents related to technology used to store data on computer chips, the Wall Street Journal reported.
The Financial Times reported that Citigroup Incorporated (NYSE: C) is allowing private equity groups such as Apollo, The Blackstone Group LP (NYSE: BX) and TPG that are bidding for up to $12B of its leveraged loans to 'cherry-pick' from a wide range of assets with different credit ratings and prices.
Speaking to friends, the $1 trillion question that keeps arising is "when do we start buying?" Astute investors, they've certainly lightened up on their exposure to stocks over the past few months and have cash sitting on the sidelines. "Are we making a bottom here?" they ask, readying themselves to start moving back into the stock market. As asset allocation and modern portfolio theory tells us, stay in the market, be diversified, and don't trade on emotion. The problem is that investors doing that since 2000 would have seen little investment returns in exchange for taking on stock market risk.
So, with this info in hand, more aggressive investors are looking to spot a bottom and make a buck along the way. So, it's interesting to read weekly Barron's article out over the weekend entitled For the Bold Investor, This Could Be the Time to Buy Tech Stocks. The article, written by one of this author's favorite journalists, Eric Savitz, looks at Oracle's (NASDAQ: ORCL) recent performance as indicative for what's happening to tech. Citing Oracle's Chief Financial Officer Safra Catz, Savitz explains that deals were getting harder to close with some business slipping into the May quarter. Tough times for tech.
So why does Barron's think we should start buying now?
There's much concern in the information technology (IT) world. Might companies cut back on spending in light of the slowing economy?
Well, as for Red Hat (NYSE: RHT), the environment seems to be OK. For example, in Q4, the company posted a 27% increase in revenues to $141.5 million. What's more, bookings are bulging (above $200 million).
While RedHat has a strong business with its Linux offerings, the company is also seeing lots of traction with its middleware platform, known as JBoss. Interestingly enough, with Oracle's (NASDAQ: ORCL) buyout of BEA Systems (NASDAQ: BEAS), there's been a surge in downloads of JBoss. Basically, customers want an alternative.
Going forward, Red Hat forecasts revenues of $665 million to $680 for the upcoming year. Earnings are expected to range from $0.78 to $0.82 per share.
And Red Hat recently purchased Amentra, which is a systems services company. Basically, the deal will allow Red Hat to continue to turbocharge its sales of JBoss.
Shares of Oracle Corp. (NASDAQ: ORCL) are trading slightly lower today as traders prepare for the company's third quarter earnings release. The company is scheduled to report its recent quarterly numbers today after the market closes.
When the company announces its earnings, analysts are expecting to see earnings excluding items of 30 cents on sales of $5.4 billion, up from 25 cents a share and $4.41 billion in revenue reported in the same period a year ago.
Despite the weak market conditions and economic slowdown, Oracle has so far been able to beat or at least match analysts' expectations when it has reported earnings. For the current quarter, the company also expects strong earnings results. This might be due to the company's recent acquisitions whose maintenance revenue help offset weak earnings coming from its customersaffected by the tumbling economy.
According to independent tech research firm 451 Group, SAP (NYSE: SAP) has been trying to sell off its TomorrowNow division since January. Unfortunately, there were no bidders. As a result, SAP has decided to shut down the business.
Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
The Dow Jones Industrial Average is down 150 points (at 10:15 a.m.). I guess that it was to be expected as we 
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Speaking to friends, the $1 trillion question that keeps arising is "when do we start buying?" Astute investors, they've certainly lightened up on their exposure to stocks over the past few months and have cash sitting on the sidelines. "Are we making a bottom here?" they ask, readying themselves to start moving back into the stock market. As asset allocation and modern portfolio theory tells us, stay in the market, be diversified, and don't trade on emotion. The problem is that investors doing that since 2000 would have seen little investment returns in exchange for taking on stock market risk.
There's much concern in the information technology (IT) world. Might companies cut back on spending in light of the slowing economy?
Oracle
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