SAP Sees Business as Usual; Oracle - Yay or Nay?

Brian.oco 0 Tallied Votes 270 Views Share

Trying, ever so hard, to find some good news amidst the doom and gloom on Wall Street.

At least the market went up for a second straight session, with the DJIA up 400 points on Monday trading; that after rising 500 points last Friday. Investors seemed cautiously optimistic about the Federal Reserve/U.S. Government's plan to bail out Citicorp to the tune of $300 million. And one trader, perhaps suffering from a nasty case of irrational exuberance, thought that the stock market had finally found its bottom. I won't go that far, but two straight days of triple-digit gains on Wall Street is worth popping a cork or two, no?

Perhaps some investors noticed that SAP AG is somewhat serene about global business decisions. A top exec told Reuters last Friday that the downward economy hasn't "gotten any worse" since October. "There's business out there," says SAP co-CEO Leo Apotheker. "We just need to continue to move ahead." The SAP comments, coupled with HP's stronger-than-expected Q4 earnings picture, are the best news the tech sector has gotten in weeks (okay, feel free to throw Jerry Yang's resignation into the mix).

Investors will get a better sense as to where tech stocks are headed after SAP rival Oracle Corp releases results next month. Oracle's stock price rose 6.4% today, perhaps due to the SAP sentiments, but not everyone is convinced that buying Oracle is such a great idea.

One highly-followed tech analyst, Barclay's Israel Hernandez, cut his price target on Oracle from $27 to $22. He says that the software giant is still in the middle of a huge cost-cutting campaign and that the slowdown in IT spending will hold Oracle back next quarter. He also slashed Oracle's 2009 earning estimate to $1.44 per share from $1.55 per share, while cutting the company's revenue forecast to $24.5 billion from $25.4 billion.

Even so, Hernandez, is still relatively bullish on Oracle, writing in a research note this week that the lower estimates reflects the deteriorating macro environment and currency environment.
Hernandez writes that “it is prudent” to lower estimates here, given “lower closure rates” and a contraction in IT spending over the next several quarters. But he tags Oracle as "overweight" and that should boost the company's stock going into the new quarter.

Trading at around $16 per share, Oracle could be yet another tech bargain waiting for the storm to clear.