Oracle Stands Tall as Economy Thaws

NEW YORK (TheStreet) -- Database giant Oracle(ORCL), which reports its first-quarter results after the market closes Wednesday, may offer upside to recession-weary investors as the tech sector begins its recovery.

Despite antitrust concerns hanging over its $7.4 billion acquisition of Sun Microsystems(JAVA), the software maker is seen as a good bet in an improving economy.

"We believe a combination of new product releases coupled with gradually improving corporate IT spending and accretion from the anticipated Sun acquisition makes Oracle an attractive investment," wrote Ross MacMillan, an analyst at Jefferies & Company, in a note Wednesday. MacMillan also raised his Oracle price target from $24 to $26.50.

Specifically, MacMillan sees growth opportunities around Oracle's recently announced Middleware 11g product and its forthcoming raft of new Fusion applications.

Analysts surveyed by Thomson Reuters expect Oracle to post revenue of $5.25 billion and earn 30 cents a share, as upgrades and maintenance contracts offset weakness in new business.

Oracle also received a "buy" rating from the TheStreet.com Ratings recently, and its stock has risen more than 28% this year.

The Sun acquisition, however, has hit a speed bump, and was recently delayed by a European Commission antitrust probe into the merger. Already approved by the DoJ and by Sun's shareholders, the deal is undergoing close scrutiny on the other side of the Atlantic. EC officials are chiefly concerned about Oracle getting its hands on Sun's MySQL database and thus limiting the choice for database software.

Jefferies & Company's MacMillan is not unduly concerned, and thinks that Oracle can still reach its target of adding 15 cents to non-GAAP earnings in the first full year after closing the acquisition. "[The] Sun Micro delay is painful, but still accretive," he wrote. "To achieve target accretion, we believe Oracle needs to cut around 25% from run-rate opex (which will fall further due to Sun's own ongoing restructuring efforts) and this remains a plausible cost reduction in our view."