How High Can Oracle Climb?

On Thursday, Oracle (ORCL +1.71%) will release its latest quarterly results. Among ordinary Americans, more people probably know CEO Larry Ellison for his recent purchase of the Hawaiian island of Lanai than for his company, which focuses more on business software than on the products with which consumers are most familiar. But through its purchase of Sun Microsystems, Oracle became a much higher-profile play, with most consumers being aware of the plug-in Java.

Oracle has lofty ambitions, seeking to go beyond its traditional enterprise software and server niche to become a one-stop full-service IT solutions provider. Unfortunately, just about every other major tech company has the same ambitions. Can Oracle win the race? 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.

Can Oracle turn things around this quarter?
Analysts haven't looked favorably on Oracle's earnings prospects lately, cutting $0.01 from their May estimates and $0.03 from their fiscal year 2014 consensus. The stock has suffered as a result, falling more than 5% since mid-March.

Most of the damage to Oracle's stock came right after its previous quarterly report, in which the company reported much weaker revenue growth and earnings than investors had expected. Although the company's software-as-a-service sales more than doubled, shareholders didn't like Oracle's explanation that its newly expanded sales force was to blame for the shortfalls. Given how competitive the industry has gotten lately, Oracle can't afford to repeat miscues like this.

To be fair, though, some of Oracle's competitors have seen similar trouble. IBM suffered from weak government orders in the U.S. and China, sending its first-quarter revenue down 5%. Although Hewlett-Packard has seen its stock soar so far this year, HP has also been having to work hard to try to succeed in a sluggish IT-spending environment.

Earlier this month, Oracle announced an expanded strategic alliance with long-struggling Dell (DELL +0.00%). The partnership allows Oracle to take advantage of Dell's hardware expertise as it tries to offer an integrated networking, storage, and server solution to the challenges customers have in meeting their IT needs, especially in connection with building up their cloud-computing capability. For its part, Dell benefits from having a new channel to offer its hardware products, which remains a crucial part of its overall business.

In Oracle's report, watch for comments about how the integration of its recently acquired Acme Packet business is going. With some arguing that Oracle should go out and make additional purchases, it should be interesting to see what Ellison and his management team have in mind for future strategy.

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