Oracle on Track for Second Quarter

A currency tail wind and a modest improvement in Oracle's(ORCL Quote - Cramer on ORCL - Stock Picks) ailing applications business likely will help the database giant hit its second-quarter financial targets.

On Monday, Morgan Stanley analyst Ross MacMillan raised his estimates of license revenue for the quarter, the latest in a recent flurry of sell-siders expressing confidence in Oracle's near-term prospects. "We have not changed our underlying estimates, but due to foreign exchange, our license revenue estimate increases from $872 million to $888 million, in line with consensus," he said in a note. "Our EPS forecast remains at $0.13."

MacMillan also raised his forecast for earnings in 2005 and 2006 by 4% and 3%, respectively, to reflect the dollar's recent drop. (Morgan Stanley has a current investment banking relationship with Oracle.)

Similarly, First Albany analyst Mark Murphy said last week in a note that "recent discussions with Oracle-related industry contacts suggested that the November quarter seemed to be 'good, but not a blowout.'" (First Albany does not have a current investment banking relationship with Oracle.)

Analysts polled by Thomson First Call are expecting a profit of 13 cents on sales of $2.63 billion.

Although Oracle's application business was terrible in the first quarter, with license revenue down 36% year over year, Murphy believes that it picked up in the second quarter and will be off only about 1% from last year. According to Murphy, the deal pipeline has improved, and Oracle is close to landing a deal worth $30 million with a Fortune 100 customer.

With its heavy offshore sales, Oracle, is well positioned to take advantage of the weak dollar. So far this quarter, the dollar has fallen by 6.47% to a record low against the euro, and by 7.7% to a four-year low against the yen -- moves that have helped other software companies as well.

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