Oracle (NASDAQ:ORCL) will report its Q1 FY12 earnings on September 20, and we’re looking for updates on several fronts. Most importantly, we are watching for how macro volatility in Europe is impacting its business given that almost a third of its revenues come from Europe. We are also watching the top line growth in the hardware segment as well as the gross margin impact from new products like its Exadata services and its legacy hardware business. We are encouraged that it has converted Sun’s loss making businesses into profits and has come up with a solid product portfolio following this acquisition. Looking ahead, we expect Oracle to continue gaining market share in the database and middleware markets where it competes with SAP (NYSE:SAP) and Microsoft (NASDAQ:MSFT).
We currently have a $37 Trefis price estimate for Oracle, which is 25% above the current market price.
Hardware to Drive Software Sales, Margins Expected to Improve
Oracle has been focusing on increasing the gross margins in the enterprise servers business which it acquired from Sun. We expect its market share to decrease marginally by the end of the forecast period as the overall market grows faster than Oracle. However, sales of its Exadata servers should continue to pick up and drive database and middleware software sales, and we expect to hear more on this front. We expect its overall margins to continue to improve going forward.
Macro Uncertainty is the Key Risk
The continued political wrangling in the US will weigh on business. In addition to this, the volatility and uncertainty in the Euro zone will likely depress revenues from this region, in particular the financial and public sectors. Oracle generates around 30% of its revenues from Europe. In this earnings call, we also look for updates on Android’s lawsuit against Google, which could increase the cash in Oracle’s coffers by more than a billion dollars.
