Tonight, we'll get another earnings report from database and business software giant Oracle (NASDAQ:ORCL), followed by what promises to be an entertaining conference call. Be there or be square. Here's the story so far.

What analysts say:

  • Buy, sell, or waffle? Thirty-six analysts follow Oracle these days. Twenty-three of them have a buy rating on the stock, versus two sells. The remaining 11 firms are content to hold. In Motley Fool CAPS, Oracle is a middle-of-the-road three-star stock.
  • Revenues. Sales are expected to grow 22.2% over last year, to $4.15 billion.
  • Earnings. The average forecast calls for $0.22 of earnings per share, up from $0.19 one year ago. Oracle likes to guide low and overdeliver and has never in its corporate history missed an analyst target.

What management says:
What doesn't management say? CEO Larry Ellison got into a public mud-flinging spat with rival SAP AG (NYSE:SAP) three months ago. The topic was each company's progress in providing service-oriented architecture (SOA) business management software. Allow myself to quote ... uh, myself:

"Ellison pointed out that SAP's software suite is entirely proprietary, while his own is based on Sun's (NASDAQ:SUNW) Java language and will work with competing middleware suites like IBM's (NYSE:IBM) WebSphere or BEA's WebLogic in addition to running on Oracle's own products.

That puts Oracle in position to grab market share by selling to companies that already have expertise and a comfort level with these competing toolkits. It should be a much easier sell than SAP's 'retrain or rehire your middleware team' alternative. As for SOA, Ellison said that Oracle is two years ahead of SAP on the road to a complete suite of pluggable components."

SAP immediately fired back with the opposite position:

"The 2005 version supports SOA today, and Oracle's Fusion SOA application is still under development, so it looks as though Oracle may be the Johnny-come-lately at this party after all."

What management does:
All of the important margins have been rock-steady for the past year and a half, which is somewhat remarkable for a high-flying tech company. The company also keeps swallowing acquisitions, one after the other, with nary a speed bump in the margins chart. It's a testament to Oracle's maturity, and a sign that the transition from growth stock to value stock already happened here. ROE growth peaked in 2000, and has generally tracked downward ever since.

Margins %

May-05

Aug-05

Nov-05

Feb-06

May-06

Aug-06

Gross

77.6%

77.3%

76.9%

77.3%

77.6%

77.1%

Oper .

37.3%

36%

34.3%

35.3%

34.8%

34.7%

Net

24.5%

23.4%

22.3%

23.2%

23.5%

23.2%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Oracle keeps growing by acquisition, which is a fairly safe way to tack on sales growth every quarter. Keep an eye on those margins to make sure they don't start to drop, and be sure to tune in to the conference call. That's always where the real fun happens with this company.

Competitors:

  • SAP
  • Red Hat (NYSE:RHT)
  • Microsoft (NASDAQ:MSFT)
  • IBM
  • TIBCO (NASDAQ:TIBX)

Further Foolishness:

Microsoft is an Inside Value pick. Find more great companies on fire sale with a free 30-day all-access pass to our premium bargain-hunter service.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is good for dinner and a show.