Investment Opinion
FOOL PLATE SPECIAL
Oracle's Webbed World
Database giant ORACLE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORCL)") else Response.Write("(NASDAQ: ORCL)") end if %> reported its best quarter in years yesterday. The Redwood City, California software concern posted revenues up 44% and earnings per share increasing 48.1% -- a full 5.2% better than consensus expectations. Wall Street rewarded wannabe Webmeister Oracle in heavy trading this morning, pushing the company's stock up $2 1/4 to $37 1/8.
Oracle's quarter was driven by its application license sales, which were up 73% on top of a 49% increase in database license revenues. This implies that Oracle is leveraging existing customer relationships with database license clients to sell them new, Web-centric applications as well. It also suggests that the combination of both products is attracting droves of new customers.
Operating margins continued to grow year over year, with Oracle coming in with 27.9% in the fourth quarter of 1996 compared to 26.5% in the fourth quarter of 1995. Controlling costs has allowed Oracle to grow its operating margin by a point or so a year for the last four or five years, contributing to the giant surge in the company's revenues and earnings.
Wary analysts will probably hold off on any upgrades for fiscal 1997 earnings estimates, however, for two reasons. The first is that Oracle's tax rate will increase 1.5% next year, eating up the majority of the operating margin increase the company saw in the fiscal fourth quarter. Also, Oracle's employee compensation system also tends to make the fourth quarter bulge in comparison to the rest, as employees need to book new business before the fiscal year ends to fatten up their year-end bonuses.
The larger story is here is the fact that the Digital World is accelerating earnings and revenues at some of the largest software and hardware companies in the world. Names like Oracle, Microsoft and Cisco Systems have been seeing the Internet and intranets as their way to continue their torrid growth over the next decade -- a claim that a quarter like this for Oracle helps to substantiate. Investors were apparently projecting Oracle's database success onto INFORMIX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IFMX)") else Response.Write("(NASDAQ: IFMX)") end if %> this morning, bidding up the shares $1 1/2 to $21 5/8, in spite of the fact that the real gem of Oracle's report, applications revenues, is an area where Informix does not compete. Another digital database concern, RED BRICK SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: REDB)") else Response.Write("(NASDAQ: REDB)") end if %>, did not appear to be open for trading around lunchtime.
APPLIED BIOSCIENCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: APBI)") else Response.Write("(NASDAQ: APBI)") end if %> shares soared $3 1/8 to $12 1/4 after the company agreed to merge with PHARMACEUTICAL PRODUCT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PPDI)") else Response.Write("(NASDAQ: PPDI)") end if %> via a stock swap.
OAKWOOD HOMES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OH)") else Response.Write("(NYSE: OH)") end if %> shares advanced $7/8 to $23 7/8 after Goldman Sachs initiated coverage by placing it on their "recommended" list.
Staffing services firm ROMAC INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ROMC)") else Response.Write("(NASDAQ: ROMC)") end if %> popped up $7/8 to $23 1/8 after Smith Barney started it with a "buy" rating. Staffing and temporary services has been a hot sector lately for momentum players.
Rebounding slightly from a big drop yesterday is TELXON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TLXN)") else Response.Write("(NASDAQ: TLXN)") end if %>, up $5/8 to $10 1/2. The portable teletransaction system developer had warned of disappointing earnings.
Israel-based TECNOMATIX TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCNOF)") else Response.Write("(NASDAQ: TCNOF)") end if %> announced a new software release today, which integrates production engineering tools for the CAD (computer-aided design) environment. Shares rallied $1 1/16 to $18 13/16.
SPEEDWAY MOTORSPORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRK)") else Response.Write("(NYSE: TRK)") end if %> raced ahead $1 3/8 to $26 1/2 this morning after the company announced it had reached an accord regarding use of a track 50% owned by a someone else. Details were sketchy.
The acquisition of Borden's Global Packaging Business for $360 million will triple AEP INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AEPI)") else Response.Write("(NASDAQ: AEPI)") end if %> to $900 million, sending shares of the polyethylene film manufacturer soaring $1 3/8 to $34 7/8 this morning.
Foreign digital printing concern XEIKON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: XEIKY)") else Response.Write("(NASDAQ: XEIKY)") end if %> has apparently been caught up in the turmoil surrounding PRESSTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRST)") else Response.Write("(NASDAQ: PRST)") end if %>, calling its recent declines "excessive" yesterday. The shares rebounded $2 3/4 to $12 1/2 today as Presstek climbed $5 1/2 to $48 1/2 on its own comeback.
STRUCTURAL DYNAMICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SDRC)") else Response.Write("(NASDAQ: SDRC)") end if %> rose $2 1/8 to $24 5/8 this morning after it released news that the $200 million Ford contract is "on track". This comes on the heels of a large decline earlier in the week when Alex Brown upgraded Structural's arch-competitor, Parametric.
SPS TRANSACTION SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAY)") else Response.Write("(NYSE: PAY)") end if %> sees second quarter numbers below estimate due to declining credit quality, falling $7 1/4 to $17 1/2. The company is about 80% owned by Dean-Witter Discover, meaning the float is pretty small for such a large company.
Improper bookkeeping and accounting has burned MANHATTAN BAGELS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BGLS)") else Response.Write("(NASDAQ: BGLS)") end if %> badly, nearly halving shares, as they careened down $9 1/8 to $12 1/8. The last two quarters' earnings are likely to be affected.
DIAMOND MULTIMEDIA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DIMD)") else Response.Write("(NASDAQ: DIMD)") end if %> plummeted $4 1/4 to $9 1/2 after the company stated falling prices for computer-graphics products and modems could cause it to lose money this quarter -- down significantly from current estimates of $0.34 EPS. Cowen & Co. downgraded it from "buy" to "neutral" and Laidlaw cut it from "buy" to "hold".
SIERRA SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SERA)") else Response.Write("(NASDAQ: SERA)") end if %> warned of disappointing earnings for its second quarter and paid the price of a $1 7/8 to $11 1/4 drop. The company expects $0.23 per share, while analysts had expected $0.30.
ADVANCED MICRO DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> also pre-announced some bad news, forecasting a loss in the second quarter compared with expectations of a $0.06 per share gain. Apparently pricing on some commodity components was worse than expected. Shares slipped $1 3/4 to $14.
HARRAH'S ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HET)") else Response.Write("(NYSE: HET)") end if %> forecast it would earn between $0.33 and $0.35 EPS next quarter, falling $2 5/8 to $28 1/2 for its troubles.
ELCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELK)") else Response.Write("(NYSE: ELK)") end if %> projected earnings of $1.10 to $1.20 EPS for this year and $1.30 to $1.50 EPS for 1997, knocking the stock down $2 to $19.
Tape storage maker EXABYTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EXBT)") else Response.Write("(NASDAQ: EXBT)") end if %> go whacked for $2 1/16 to $14 1/16 after Montgomery Securities downgraded it to "neutral" from "buy".
Circuit-maker MERIX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MERX)") else Response.Write("(NASDAQ: MERX)") end if %> crashed $6 1/2 to $20 1/4 today after posting earnings two cents lower than projected earnings. The stock was downgraded by Hambrecht & Quist from "buy" to "hold".
GIBRALTER STEEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ROCK)") else Response.Write("(NASDAQ: ROCK)") end if %> shares were belted for $2 1/2 to $18 after the company offered additional shares in order to pay off debt. Investors are clearly concerned about dilution.
Randy Befumo (MF Templar),
a
Fool
Selena Maranjian (MF Selena),
another Fool