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ORCL Report
Prakhar Agarwal Julian He

Business Overview
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Database software (inc. Exadata database machine, which is sold preconfigured with oracle database software) Middleware (inc. application server, business intelligence, data integration, portal server, identity management) Enterprise applications Content management and collaboration Development tools Enterprise management software Software-as-a-Service Hosted and On Demand solutions Operating Systems (Enterprise Linux) Virtualizations software Consulting/systems integration

Business Overview
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Worlds largest enterprise software company and leading provider of computer hardware products/services Software (68%)
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New software licenses Software license updates/product support Hardware systems products Hardware systems support Consulting Cloud Services Educaton

Hardware systems (19%)

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Services (13%)
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Financials Overview
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Current Price: $28.88 P/E: 15.20 Yield: 0.831 Beta: 1.1 Market Cap: $143.68 Billion 52 Week High: $36.50, Low: $24.72

Recent/Important Acquisitions
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History of large scale acquisitions to eliminate competition Sun Microsystems

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January 2010 Added hardware side of business Sales have been struggling October 2011 Cloud services (customer relationship mangement) February 2012 Cloud-based talent acquisition, performance management, learning/ development, compensation

RightNow Technologies ($1.5 Billion)

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Taleo ($1.9 Billion)

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Competition
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Enterprise software/hardware applications

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Microsoft IBM Hewlett-Packard SAP AG Intel New/growing competitors (Salesforce, etc)

Financials

The Benjamin Graham Model

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P/E < 15:

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Oracle: 15.20 Industry average: 28 PASS

Price to book ratio < 2:

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Oracle: 3.38 Industry average: 5.9 NOT PASSED

The Benjamin Graham Model (cont.)

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Current ratio > 1.5

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Oracle: 37538 / 11632 = 3.22713205 PASS

ROE > 15%

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Oracle: 24.5% Industry average: 23.18% PASS

The Benjamin Graham Model (cont.)

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EPS growth (TTM) > 3%

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Oracle: 25.98% Industry average: 22.54% PASS Dividend: 0.82% compared to industry average of 3.42% Few pay dividend in this industry N/A Oracle: 34.15% Higher than industry average NOT PASSED

Dividend growth (past 5 years)

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Low debt/equity ratio

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Ratings

Ratings (cont.)

Model Recommendation: Hold

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Solid fundamentals Very undervalued compared to peers Not the best stock to buy Recommendation: hold

Technicals

Long Term Technicals: Neutral

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Moving Average Convergence/Divergence (MACD) indicates a Bearish Trend. Chart pattern indicates a Weak Downward Trend. Relative Strength is Neutral. Up/Down volume pattern indicates that the stock is under Accumulation. The 50 day Moving Average is rising which is Bullish. The 200 day Moving Average is falling which is Bearish. Price is above Resistance of 27.77 which is Bullish.

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Valuation Bands: Bullish

Earnings Strength: Neutral

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The graph shows the acceleration or deceleration in trailing 12 month operating earnings per share growth. The lack of curvature of the plotted points in the graph on the right indicates that while Oracle Corp.'s earnings have increased from $2.13 to an estimated $2.27 over the past 5 quarters, they have shown no acceleration or deceleration in quarterly growth rates when adjusted for the volatility of earnings.

Relative Valuation: Positive

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Oracle Corp.'s operating earnings yield of 8% ranks above 78% of the other peer companies, indicating that it is undervalued.

Quantitative Evaluations: Positive

Insider Buying/Selling
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NOT GOOD

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Partly correlated w/ performance Downturn after June/July, 2011 and October, 2011

Wall Street Consensus: Positive

ORCL/GOOG Lawsuit
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Filed August 2010

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Regarding copyright infringement of Java on Android platform

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Trial has recently started in court Expected 8 week trial This past week featured Google CEO Larry Page on the stand stumbling for words, answering I dont recall multiple times Fact brought up during trial: no other (major) company has used the specific features in question without paying up

Acquisition of Taleo
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Adding talent management and recruiting cloud capabilities Will combine with Oracles previous Fusions HCM recruitment products Clients include nearly half of Fortune 100 (and over 5000 other companies) Processed 15% of last years US hires (second to Salesforce) Acquisitions will help fend against ORCLs recent acquisition of Success Factors Short Term benefit for investors is limited

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Q3 Earnings
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Revenues rose 3% to $9 billion New software licenses rose 7% to $2.4 billion Hardware systems products revenues fell 16% to $869 million
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BUT hardware revenue for engineered systems rose 139%

Net income rose 18% to $2.5 billion beating expectations

Other Recent Events

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Named worldwide leading supplier of supply chain planning solutions by ARC advisory group Oracles Sun ZFS Storage Appliance Beats IBM on SPC-2 Benchmark Performance Results Recent ratings downgrades
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Zacks Investment Research: reiterated neutral rating JMP Securities: downgrade from outperform to market perform Caris & Co. Buy to average Macquarie: Outperform to neutral Morningstar analyst ratings: 3 buy, 1 outperform, 6 hold

Overview
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Pros:
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Strong Fundamentals Undervalued Strong case against Google Earning miss like that of Q2 2011 extremely unlikely Set to deliver highest operating margins in history Debt Insider Selling Hardware Sales Neutral

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Technical:
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Recommendation

HOLD