by Tom Taulli | December 20, 2013 6:05 am
Oracle (ORCL) stock got a 6% boost yesterday following the company’s second-quarter earnings report. That’s the good news for ORCL stock fans.
Still, it’s probably little comfort for the demanding Oracle CEO and co-founder, Larry Ellison. Shares of ORCL stock are up less than 10% for the year, which compares to a gain of 27% for the S&P 500. Hey, even Microsoft (MSFT) was able to post a gain of 36%.
What’s wrong with Oracle? Well, the IT environment has been a slog, both thanks to tight corporate budgets and the emergence of new technologies like cloud computing. No doubt, it’s been poison for ORCL stock.
It is true that Q2 Oracle earnings were encouraging. Earnings came to 69 cents a share, up from 64 cents a share in the same period a year ago and better than the 67 cents analysts were looking for. As for ORCL revenues, they increased by 2% to $9.3 billion — also better than expected.
Plus, the Oracle earnings report also had a promising outlook. The company is forecasting revenue growth of 2% to 6% for the current quarter compared to the consensus of 4%. This was really the driver for yesterday’s move in ORCL stock.
But while these numbers beat expectations, the fact is that the bar was not high for Oracle earnings anyways. And it is probably a good bet that Oracle CEO Larry Ellison wanted much more.
Sure, the Oracle CEO certainly has a strategy to get things back on track. On the Oracle earnings conference call, for example, he talked up the company’s new database offering 12C, which seems to be getting traction. But that may not be enough for ORCL stock, since the company has to deal with an emerging group of database startups that are using new-fangled technologies like NoSQL. Over time, these alternatives could eat into the Oracle market share.
Of course, Larry Ellison is also touting his cloud investments. But for the most part, it is about catching up to the competition. After all, some of the fiercest competitors, like Worday (WDAY) and Salesforce.com (CRM), are working on next-generation systems and as a result, are snagging major customers.
All in all, things look pretty ugly for ORCL stock. If anything, this is the first time since the 1980s that Larry has had to deal with scary competition for applications and databases.
In light of this, it will probably be tough for Oracle to get growth back into gear, at least for 2014 … which could keep ORCL stock as an underperformer. Sorry, Larry Ellison.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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