Will Oracle Earnings Turn the Stock Around?

Oracle (ORCL 0.77%) will release its quarterly report on Wednesday, and given the big drop the stock suffered after previous reports, investors are nervous about the tech giant's impending results. Yet substantial growth in Oracle earnings could spark a nice rally from the stock's past declines.

Oracle helped pioneer the enterprise-software space, with its business orientation largely escaping the notice of mainstream home customers but still dominating corporate America and companies around the world. Yet as large tech companies have started crossing their traditional boundary lines to invade each other's territory, Oracle has had to balance opportunities from new niches against defending its core focus area. Let's take an early look at what's been happening with Oracle over the past quarter and what we're likely to see in its report.

Stats on Oracle

Source: Yahoo! Finance.

How will Oracle earnings fare this quarter?
Analysts have cut back their views on Oracle earnings slightly in recent months, reducing their August-quarter estimates by $0.02 per share and their full-year fiscal 2014 projections by $0.03 per share. The stock hasn't performed well either, falling 3% since mid-June.

Most of those declines came immediately after Oracle's May-quarter earnings report. On its surface, Oracle's report wasn't all that bad, with adjusted earnings up 5% and the company choosing to double its dividend and boost its stock-buyback program. Yet just a 2% rise in revenue spooked those investors who'd expected to see more top-line growth in a traditionally stronger seasonal quarter for the company, and as a result, the stock dropped 9% in a single day.

In order to try to spur faster growth, Oracle has had to make some competitive compromises. In late June, the company made a joint presentation with Microsoft (MSFT 1.44%) that detailed the ways in which Oracle's software can work with Microsoft's Azure cloud services suite. The move was interesting, given that both companies have their own rival products that fill in each other's gaps. But in the company's words, "Oracle's strategy and commitment is to support multiple platforms," including Windows.

Oracle followed that up with an announcement with NetSuite (N) targeting the mid-sized corporate cloud-computing market. With Oracle CEO Larry Ellison having a substantial stake in NetSuite, the deal will integrate NetSuite's enterprise resource-planning capabilities into Oracle's broader product offerings.

Most important, though, was Oracle's partnership with salesforce.com (CRM -0.09%). For the next nine years, the two companies will work together on their applications, platform, and infrastructure segments, with Oracle planning to provide the core technology powering Salesforce's applications and platform and to integrate Salesforce with its Fusion HCM and Financial Cloud. Salesforce, meanwhile, will implement those two applications and standardize using Oracle's Linux, Exadata, Database, and Java Middleware platform.

In the Oracle earnings report, watch to see how the initial stages of all these partnerships are going. Investors will want to see faster growth as a result of these deals, and if they don't get it, they'll question Oracle's broader strategy -- and perhaps once again send shares tanking after the report. If Oracle does grow, though, then it could signal another move up for the stock.

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