Shares of Oracle (ORCL) are down 22 cents, or 0.8%, at $28.02 after Caris & Co.’s Curtis Shauger cut his rating on the stock to “Average” from “Above Average,” while maintaining his $32 price target, writing that the company’s strategy of selling integrated hardware and software as an appliance for data processing is failing to bear fruit as expected.
Although management continues to paint a bright future in its �engineered systems� strategy, highlighted by ongoing impressive data from its Exa product lines, these results do little to increase our confidence in what we once viewed as a potentially powerful strategy for a mega-cap name like ORCL [...] Although management has done a masterful job of restoring profitability to Sun Micro, its revenues continue to contract at a painful pace (-12% y/y in its most recent quarter, against a relatively easy comparison). While we anticipated some protracted weakness and believe the current macro-environment hasn�t helped, it is a long road to where we thought ORCL would be by now from a revenue per- spective, a trend that may not decisively turn any time soon.
Moreover, Oracle’s traditional software sales, up just 2.5% last quarter, suggest the company is losing share to SAP AG (SAP), which saw 17% revenue growth in its most quarter, he writes. Other competitors such as NetSuite (N) and International Business Machines (IBM) are also showing better software sales growth, he writes.
Fin.
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