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Oracle Earnings Preview: Setting the Tone for Tech Spending

ORACLE (ORCL)

Largest maker of business software. Purchase of BEA Systems expands offerings to include middleware -- software that helps different programs speaks to each other.

Reports Q4 earnings Wednesday 6/25 at approx. 405p ET. Conference call at 5p ET.

WHAT WILL MOVE THE STOCK:

EXPECTING A BEAT - Forget about Oracle's disappointing third quarter. Wall Street is looking for a solid Q4. There's lots of talk about Oracle beating current profit estimates of 44 cents per share, so a small beat is unlikely to drive the stock higher.

Oracle's headquarters in Redwood City, California.
Paul Sakuma
Oracle's headquarters in Redwood City, California.

A possible area of concern: middleware. Competitor Tibco warned on June 3, noting weak North American sales.

TIBX said earnings would be 5 to 6 cents per share, well below estimates of 8 cents a share. The company's shares fell 8% on that news. However, Oracle shares were unchanged that day. Is Oracle taking market share from Tibco or is there broader weakness in the middleware market?

OVERSEAS STRENGTH - Even if U.S. results are tepid, international sales are likely to pick up the slack.

TELL US ABOUT THE U.S. ECONOMY - What do Oracle's results tell us about business spending? Oracle sells to an amazingly wide range of American companies. Can you say bellwether?

INTEGRATION - Oracle closed its $8.5 billion acquisition of BEA Systems in April. How's the integration going? Look for estimates of costs (or savings).

HOW'S Q1 LOOKING? - Guidance for Q1 will be key. Will Oracle be able to repeat the strong numbers analysts are expecting for Q4?

ESTIMATES:

Q4 EPS up 19% to $0.44, revenues up 17% to $6.864 billion

Q1 EPS up 25% to $0.27, revenues up 19% to $5.471 billion

FY 09 EPS up 18% to $1.50, revenues up 16% to $25.793 billion

Source: Thomson Reuters

Note: See Factoids for Oracle's EPS and revenue guidance.

Year-ago actuals: Q2 EPS $0.37, revenues $5.883 billion

FACTOIDS:

PREVIOUS GUIDANCE - On March 26, Oracle said it expected Q4 profits of $0.43 to $0.44 per share and revenues between $6.71 billion and $6.94 billion.

DOUBLE-DIGIT QUARTER - Oracle shares lost 7% the day after last quarter's earnings report (March 27). But since then, ORCL is up 14.4%.

RECENT HIGH - On June 3, Oracle briefly rose to $23.57, its highest level in more than seven years.