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TheStreet Open House

Oracle Circling Back to Make Good

NEW YORK ( TheStreet) -- I had to offer an immediate apology following Oracle's (ORCL) weaker-than-expected June quarter and what culminated in a disappointing end to an otherwise solid fiscal year.

While I'm not assuming blame for Oracle's underperformance, I share in the responsibility for raising expectations to a level that Oracle couldn't deliver. But that's in the past.

On Wednesday, the database giant, which saw its stock plummet 9% immediately following the June announcement, will have some making up to do. After two consecutive quarters of lackluster sales, Oracle must prove to investors that these recent notions of "underlying fundamental issues" present at the company, are a myth. And Oracle's case needs to be convincing, especially given how well rivals such as Salesforce.com (CRM) and Workday (WDAY) have performed.

To that end, I'm looking for significant improvement, not only in Oracle's overall revenue growth, but also in new software licenses and cloud software subscriptions. By "significant," I mean growth in the area of 3.5% to 4%. Posting growth of less than 1% just isn't going to cut it, especially when it missed management's own guidance.

While I will agree that the Street's reaction, and the stock's subsequent 9% decline, was completely overblown, Oracle may have had it coming. As noted, the March quarter, during which revenue fell 1%, wasn't any better. And as fundamentally solid as Oracle has always been, the Street has also demonstrated very little patience for underperforming mature companies.

By contrast, and in the case of Workday and Salesforce.com, the Street is more than willing to reward incredible growth stories with outrageous valuations.

Also, Oracle certainly didn't help itself by issuing lower-than-expected guidance for the current quarter, on which it will report Wednesday. The Street will be looking for EPS of 54 cents on revenue of $8.48 billion, which represents revenue growth of 3.3%.

Clearly, the Street is not as optimistic as my projections. Citing IBM (IBM) and SAP (SAP) as providing better SaaS, or software-as-a-service, Oracle is said to be unprepared for the shift seen in enterprise, in terms of how IT companies procure strategic service initiatives. Although Oracle hasn't had any "blowout" quarters of late, to the extent that the company has been significantly outperformed by IBM and SAP, I disagree.

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