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Surviving Oracle in an Amazon World

ORCL Gross Profit Margin TTM Chart ORCL Gross Profit Margin TTM data by YCharts

Amazon (AMZN - Get Report) and other cloud computing offerings are expected to grow at the expense of Microsoft (MSFT), Dell (DELL), Hewlett-Packard (HPQ) and other traditional hardware and software providers.

However, before we all call our broker to short sell everyone but Amazon, keep in mind that Oracle has cloud offerings; as technology changes and costs continue to fall, cloud computing may only be fashionable for a few years.

ORCL Free Cash Flow TTM Chart ORCL Free Cash Flow TTM data by YCharts

According to the earnings call, cloud computing revenue was worth just under $240 million and slightly lower than the previous quarter. Also, total revenue was flat in constant currency valuation and only down 1% after accounting for changes in U.S. dollar valuation. More importantly, cash flow and free cash flow increased.

There was considerable discussion Thursday about the fairness of throwing the sales force under the bus for the disappointing earnings. I tend to fall into the camp that believes you can delegate authority, but not responsibility (a belief instilled upon me from the Navy). New or old, the salespeople are as good as management.

For me, if Oracle really does have an outsized amount of new sales staff, this quarter can be considered a building quarter. As a Green Bay Packer fan, I have lived through many of these years, especially in the 80s.

ORCL Stock Buybacks TTM Chart ORCL Stock Buybacks TTM data by YCharts

I trust the market will give the company the same amount of latitude and quickly look to next quarter's release to determine if Wednesday was a speed bump on the database highway, or a fundamental change in the ability of Oracle to compete.

As a consequence, we should expect to see the support level at the 200-day moving average hold and the shares to start the ascent once again, same as before. Either way, now isn't the time to decide to sell. If you want to take a stop loss and get out at least give yourself enough time to see if support holds.

If the share price support doesn't hold, you're most likely only looking at an additional 2% decline. On the other hand, if support holds, the upside is most likely at least a 10% possibly much more.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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