Dueling Fools: Oracle Bear Rebuttal

My opponent says, "Never have I wanted to lose a duel as badly as I want to lose this one. Really." His wish is my command, and I'll do this rebuttal looking at the straw dogs (ideas set up to be knocked down) in his arguments.

"Name another company besides Microsoft (Nasdaq: MSFT  ) or Apple (Nasdaq: AAPL  ) capable of absorbing $9 billion in debt and then paying off all but $1.5 billion of it in a year, thanks to ample cash flow. Can't? Me, neither." Try these: Cisco (NYSE: CSCO  ) . Nokia (NYSE: NOK  ) . Intel (Nasdaq: INTC  ) . There are more, like Motorola (NYSE: MOT  ) , but let's correct one error in the statement. It was banked cash and cash flow that allowed Oracle (Nasdaq: ORCL  ) to pay down debt so quickly.

I like this quote from a CNBC commentator: "... if [Oracle] didn't make acquisitions, you'd see the true picture of how bad this company is doing and you wouldn't want it. It's a yesteryear stock. It's not coming back." It is so true. Yet my opponent adds, "Critics will argue that the core database franchise is deteriorating." Ah, another straw dog. The database business is growing slowly. Want proof? My opponent notes that a new product last year is making for "difficult comparisons in recent quarters." Call the product what it is: Mature.

How about this straw dog? "Far as I can tell, investors are simply afraid of this stock." Ah, emotion (afraid) instead of analysis (overvalued). Paying 23 times trailing earnings is way too rich for a company that analysts expect to grow earnings 11% annually for the next five years. Oracle is spending billions -- a risk that's complicated by paying Diamond Jim prices -- because it is growth-challenged with its current batch of products.

Wait! You're not done. This is just a quarter of the Duel! Don't miss the Bull and Bear opening arguments and the Bull rebuttal. Even when you're done, you're still not done. You can vote and let us know who you think won this Duel.

Microsoft is aMotley Fool Inside Valueselection. For more expert advice on undervalued stocks, click here.

Fool contributor W.D. Crotty does not own any shares in the companies mentioned. Click hereto see The Motley Fool's disclosure policy.


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