Oracle watched for further applications growth

Oracle Corp. (Nasdaq:ORCL - news) posts
quarterly results next week with investors watching for signs
of further strength in its business applications software as it
chases industry leader SAP AG (SAPG.DE).

Shares of Oracle, the world's biggest database software
maker, have gained 20 percent since June 15 when it first
advised investors of stronger-than-expected software license
revenue in its fourth quarter.

Oracle, which has said it is taking market share from major
rivals, is due to report fiscal first-quarter earnings on
Tuesday.

Kim Caughey, an analyst at Fort Pitt Capital Group, said
she expects Oracle to build on last quarter, when it saw new
software sales on top of growth fueled by acquisitions of
companies like PeopleSoft, JD Edwards and Siebel Systems.

"What we are really looking at is new licenses for
applications and do they still have momentum?" she said. "We
still think they do."

Analysts on average expect Oracle to post a profit before
special items of 16 cents per share on revenue of $3.46
billion, according to Reuters Estimates, compared to the
year-ago period's profit before items of 14 cents a share on
revenue of $2.91 billion.

With its database business maturing, Oracle has spent some
$20 billion over the past three years to push into the market
for business applications software that helps companies
automate operations ranging from human resources to accounting
to marketing.

Investors were initially skeptical of the plan and kept a
lid on the stock until earlier this year, when Oracle finally
showed signs the acquisition strategy could be paying off.

Since June 15 the stock has risen 20 percent while SAP
shares traded on the

New York Stock Exchange have fallen nearly
4 percent.

AMR Research analyst Jim Shepherd says the company is
finally convincing customers acquired through its takeovers
that it will continue to support and update those applications
-- giving them the confidence to buy new software.

"There is no question they have done a better-than-expected
job of reassuring their acquired customer base," Shepherd said.

While he agreed Redwood Shores, California-based Oracle is
winning market share, Shepherd questioned whether it was at the
expense of SAP. He said Oracle, like SAP, tends to take
business from smaller rivals.

According to AMR, SAP's share of the applications market is
expected to grow to 43 percent in 2006 from 42 percent while
Oracle share is seen increasing to 23 percent from 20 percent.
The next biggest competitor, Sage Group (SGE.L), will shrink to
5 percent from 6 percent over the same period, AMR predicts.

Shepherd added Oracle should post solid growth as it
expands into different sectors of the applications market and
boosts its presence among smaller customers where the software
maker has not traditionally been strong.

Bernstein Research analyst Charles Di Bona said in a
research note he is looking for applications revenue of $223
million in the first quarter, nearly 5 percent more than the
consensus estimate of $213 million.

"We also believe that solid Q1-07 results coupled with
solid forward guidance could sustain current positive momentum
and propel the shares even higher," he said.

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