Oracle's No False Prophet

Last month, Oracle's(ORCL) chief executive, Larry Ellison, said that he anticipates business will get worse before it gets better. So there shouldn't be any question that the company is experiencing a marked slowdown in software sales. But does this mean that investors should write off Oracle altogether? Not at all.

To be clear, in the near term, the stock could have some more downside. A drop in customer spending, particularly after last month's terrorist attacks, has made its near-term earnings outlook questionable at best. Still, I can't help but think that investors who buy the dips will fare quite well over time.

What makes me so confident?

First, let's face it -- Oracle is a survivor. Just a couple of years back, nobody could have predicted that the company would have any real success competing against the likes of Microsoft(MSFT). Yet despite all odds, the company prevailed, turning in an amazing 15 consecutive years of revenue growth. These guys have evolved into a major player in both systems and Internet software. And they aren't going anywhere.

Its market position aside, investors may find some solace in Oracle's balance sheet. With more than $6 billion in cash and ample access to capital above and beyond that, the company is in an enviable position. What's the difference if the company has a lot of cash if its bread-and-butter licensing business is in the tank, you ask?

The answer's flexibility. With its deep pockets, Oracle can afford to reduce prices and make deals in order to move inventory and maintain its market position. It can also afford to plunk down a quarter-billion dollars every three months for R&D. Few other players in this space can make that same claim.

The bottom line is that Oracle's management team, technology and business plan are sound. Over the long haul I have little doubt that when this cloud of uncertainty lifts, the Oracle shareholder will be richly rewarded for his patience.

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