Technology shares
Interview: Pacific American Securities---Cohen, Michael---Analyst
>> viacom and echostar will soon end a dispute that has kept cbs and cable channels off of the dish satellite system. cbs executive martin franks says the dispute may be resolved before the ncaa college basketball tournament begins march 18. march madness, as it’s often called. echostar’s dish network stopped broadcasting viacom networks monday night. echostar says viacom is charging too much and forcing the broadcaster to carry channels it doesn’t want. our next guest is mildly bullish on oracle, saying he doesn’t expect any dramatic upturn in the share price any time soon but is more bullish longer term on oracle than short term. michael cohen, technology analyst with director of research at pacific american securities joins us from our offices in san francisco. sunny san francisco. michael, so the street tomorrow is expecting 12 cents a share, the average estimate and also looking for a comparable percentage increase of 8% year-on-year in revenues to $2.5 billion. where will the surprise be tomorrow?
>> i think if there is going to be a surprise, it will be to the upside. however, i’m expecting them to come in line at 12 cents and maybe slightly over $2.5 billion in revenues.
>> the surprise in the earnings or sales to the upside?
>> i would believe if there is a surprise at all, it would be in both earnings and sales but i expect them to come in line.
>> why is it that you don’t see dramatic increase in shares of oracle any time soon?
>> i’m really not seeing a catalyst for everything to happen near term. long term, i do like their strategy. they’re going to be expanding into application suites of software, taking a play out of microsoft’s playbook. as microsoft had the operating system and expanded it into applications for microsoft office, oracle’s space has been in their database business and having applications that leverage that database, they see as a good growth strategy and i agree.
>> does that strategy include their bull-headed position to surge on with their acquisition of peoplesoft? are you happy about that decision?
>> their acquisition of peoplesoft, they want to get into the enterprise resource planning software space in a big way. they’re already a player, but a number three player and they don’t see a good position going up against s.a.p. from number three and they really would like to acquire peoplesoft very much so. however, with the department of justice, it looks bleak that will happen for them and peoplesoft is now priced to a 30% discount to the bid price so the market also believes the margeer is unlikely at this point.
>> do you concur with larry ellison, the chief executive of oracle, and his persistence to pursue peoplesoft?
>> i do agree with his desire to get the company. however, i think that the persistence at this point might be overdone being that seven states and the department of justice are filing suits against them. i would back up a bit and that persistence going forward is larry ellison’s personality and i don’t think it will prevail in this scenario.
>> i put together a five-year chart of of oracle shares, showing the moving average and bracketed off what you might call dead money since the middle of 2001, in a $10 to $15 trading range for almost all of that time. what is that telling bus oracle? you can see the stock has clearly fallen from the highs in the heydays but it has been going sideways for a long time now.
>> what it’s saying is that they were in a mature business, the database business was growing very slowly. and they really needed to reach for an area of growth to demand a higher multiple on their stock. that’s one of the reasons they’re aggressively going after enterprise resource planning as another suite software. i see higher growth coming in on their application business going forward and right now we’re in that transition where the vast majority of the revenues are coming from the database business but the higher growth part is from the applications business.
>> the beautiful thing about the stock market is there’s lots of choices out there. if you don’t like oracle that much, who do you like better?
>> there’s a lot of good companies out there. i like transmeta, i like network appliance. i like veritas long term but in the short term, some people are actually seeing that oracle is competing with them in their 10-g application server and database products in that it’s helping to provide backup software, which is competing with veritas’s business.
>> michael, i have to leave it there. i appreciate you joining us today. this it michael cohen, technology analyst from pacific american securities. up next, we’ll look at mortgage applications, the housing industry boom may be getting a second wind.
