Oracle Preview: What's the Post-Sun Plan?

Just a couple of months after its shock acquisition of Sun Microsystems ( JAVA), Oracle ( ORCL) investors will be looking for an insight into the database giant's long-term strategy when it reports its fourth-quarter results Tuesday.

"We continue to rate Oracle a 'buy' and believe the stock can continue to work given potential underlying positive EPS revisions, accretion from the Sun Microsystems deal, and product launches in fiscal year 2010," wrote Ross MacMillan, an analyst at Jefferies & Company, in a note released Monday.

Oracle sent shockwaves through the tech sector when it snapped up struggling Sun for $7.4 billion.

Brimming with servers and storage, Sun seemed a strangetarget for the software giant. By adding its database software to Sun's Java, Solaris, and MySQL technology, however, Oracle could pose a serious threat to both SAP ( SAP) and IBM ( IBM), completely altering the tech landscape.

Sun's massive installed base (subscription required) could also provide a launchpad for the database specialist's software.

Oracle, which competes with IBM's DB2 offering, is expected to wrap up the deal next month when Sun shareholders vote on the planned buyout.

The software firm will then face the challenge of integrating Sun, which has earned a reputation for under-performing in recent years.

Jefferies & Company analyst MacMillan nonetheless estimates that the Sun deal could be worth 15 cents to Oracle's earnings per share in the first 12 months post-acquisition, and also expects diminishing headwinds from foreign exchange.

" With the potential for product releases on middleware, database and applications to help underlying license growth in fiscal year 2010, we continue to recommend Oracle," he added, raising his price target to $24 from $22.

Oracle posted a solid set of third-quarter results, although its profit and revenue from new software licenses slipped. For the fourth-quarter, the software giant predicted non-GAAP earnings between 42 cents a shares and 46 cents a share, or 49 cents a share to 53 cents a share in constant currency.

Analysts surveyed by Thomson Financial are forecasting fourth-quarter earnings of 44 cents a share and revenue of $6.47 billion.

After the recent slump in tech stocks, at least one analyst thinks that Oracle could serve as a benchmark for the rest of the software sector.

"We expect Oracle's results to set the earnings season tone," wrote Todd Weller, an analyst at Stifel Nicolaus, in a note released Monday. "While we are optimistic about some improvement in the demand environment we are expecting companies to maintain a conservative tack with respect to outlooks."

Although Oracle's Sun acquisition grabbed the headlines, the company is also looking to boost its virtualization story. The Redwood Shores, Calif.-based firm, for example, recently bought virtualization specialist Virtual Iron.

Oracle already offers its eponymous Oracle VM virtualization software but will now use Virtual Iron to bolster its management capabilities. By offering users a way to automate their servers, Oracle claims that Virtual Iron will reduce datacenter power consumption, something which has become the bane of IT managers' lives.

The database specialist, which announced its first ever quarterly dividend earlier this year, is also reportedly boosting its efforts around Software-as-a-Service (SaaS).

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