Oracle's Stretch for Stability

Software investors are not in a terribly forgiving mood. "If Oracle comes in light, I don't think they will get the benefit of the doubt this time," says Chuck Jones, technology analyst for Atlantic Trust Stein Roe.

Jones says that IT spending seems to be fairly steady at a year-over-year growth rate of 4% to 6%, but IT executives have been shifting spending from one sector to another as technology changes. One example: Spending on mainstream, horizontal software applications -- those that can be sold to myriad companies in different industries -- has suffered as more customers look for industry-specific, or vertical, software.

The move to vertical applications is, on the one hand, helpful to Oracle, which has embraced verticals, but it may hurt the company's core database business as dollars are shifted, notes Jones, whose company holds shares of Oracle.

The shift of IT dollars is also important to the broader tech universe. The rise of virtualization, for example, could result in a shift of IT dollars from servers to software, notably that of VMware, a subsidiary of EMC(EMC Quote - Cramer on EMC - Stock Picks), which is spinning off a part of the highly successful unit later this year.

Looking to the fundaments, here is what Wall Street is expecting in the February quarterly report:

Analysts polled by Thomson First Call are forecasting a profit before items of 23 cents a share on revenue of $4.33 billion, which translates to a robust year-over-year growth rate of 26.5% on the top line. The company earned 14 cents a share in the same quarter last year on revenue of $3.47 billion.

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