To predict the stock of Oracle (ORCL)
really requires the masterwork of a qualified oracle. The company is
predictably unpredictable.
Perhaps the reason is that the founder and CEO
is Larry Ellison, who seems to thrive on instability.
In the past month, Oracle’s stock has been surging. I would not be
surprised if it continues to do so.
The company will report its earnings on December 10. And, according to the
company, things look optimistic. For example, the company has been
aggressively slashing its operating costs (by about $1 billion in the past
six months).
What’s more, the company has been transitioning its sales
towards Web distribution. After all, that’s what such companies as Cisco
and Intel have done – with great results.
Taking a closer look at Oracle, the company does not look like a mature
relational database company; rather, it seems like a business-to-business
powerhouse. Keep in mind that many companies already use Oracle as their
database infrastructure. So, adding B2B functionality seems like a
no-brainer for Oracle.
Actually, Oracle has established the Oracle Exchange, which will launch
early next year. As the name implies, it is a platform for industries to
buy, sell and auction goods and services. For any B2B exchange to work,
there needs to be plentiful buyers and sellers. So far, Oracle has
signed-up 270 suppliers and distributors.
Interestingly enough, Ford Motor signed a deal to use the platform for its
AutoXchange network, which allows its suppliers and distributors to transact
online. American Express has a similar deal, to enable corporate employees
to book airline flights, hotel reservations, and so on.
One likely strategy for Oracle is to spin-off these units as IPOs. In fact,
Oracle has already spun-off other divisions, such as Liberate (LBRT),
which came public at $20 and is now trading for $127-5/8.
True, Oracle will not command the eye-popping sales multiples of such
high-flyers as Ariba (ARBA)
and Commerce One (CMRC).
The main reason is that a substantial amount of revenues from Oracle
derive from traditional lines of business (such as consulting and
licensing). However, the B2B revenues should spike the growth rate of the
company and result in a higher valuation. It could represent a lower-risk
approach to play the B2B trend.
