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Oracle (NASDAQ: ORCL) Has A Tough Week

 May 24, 2012 01:07 PM

(By Wall Street Window) Oracle (NASDAQ:ORCL) continued its third consecutive weekly decline, falling by 5.15% to close at $25.61 last Friday. Oracle, which is currently down 0.7% for the year, was previously trading around $28 - $30, before falling precipitously since early May. Although the enterprise software giant's fundamentals remain strong, its lack of a clear strategic direction thus far has not endeared it to investors in recent months.

Oracle is also currently embroiled in a high-profile lawsuit against Google over allegations that Google's (GOOG) Android mobile platform violates Oracle's (ORCL) intellectual property rights. Oracle is seeking $1 billion in copyright damages. The jury is now mulling over Oracle's patent claims, though the potential patent damages appear to be far less than alleged by the company.

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Some analysts feel that the company, with a market cap of $134 billion, is currently being overlooked and undervalued by Wall Street, especially its strong cash position and deep market penetration. Last week, the rating agency Fitch affirmed Oracle's issue default rating at A+, noting the company's "significant financial flexibility, strong customer attach and renewal rates for software maintenance and strong competitive position, especially in database and middleware software." The consensus estimate for the company's current quarter earnings per share is $0.79, while that of the current quarter sales is $10.9 billion.

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In addition, Oracle is also poised to make a big play in the cloud computing market. For example, its recently launched RightNow CX Cloud Service is now integrated with Oracle Fusion Sales, which the company claims will help organizations target their customers with more relevant products and services. The company has also been aggressive with acquisitions that offer synergy in research and development, as well as other hardware companies such as Ksplice and Pillar Data Systems to remain competitive in the server and hardware businesses.

Given the above, it will be difficult not to be sanguine about a company that is currently number two in the applications and business software sectors, and has operating margins of 38% and profit margins of 26% in the most recent quarter.

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