Oracle ( ORCL), the undisputed leader in the database software industry, gets a price target of $36, based on expectations that it can successfully broaden its offerings to become a major provider of enterprise software solutions. The acquisition of Sun Microsystems a year ago will enable the firm to further its strategy of providing complete IT services to its clients. It is operating off a strong base as software licensing updates and product support account for about 50% of its revenue and is the most profitable segment.

Goldman Sachs said in a Jan. 18 research report that it likes the company's expansion into the hardware sector for its long-term growth potential, as well as its continued profit margin expansion. And it said Oracle trades at a relatively cheap 13.1 price-to-earnings ratio based on the investment firm's 2012 earnings per share estimate. That ratio is well below the software group's median P/E of 19.4.

Standard & Poor's, which has Oracle rated "strong buy," said it expects sales to rise 31% in fiscal 2011, to $35 billion, including $7.5 billion of projected hardware systems and support sales gained through its Sun acquisition. It has a fiscal 2011 earnings estimate of $2 per share growing to $2.17 in fiscal 2012. It has a $37 price target on Oracle shares.

A Morningstar analyst notes that "Oracle's revenue growth and operating profits highlight management's impressive track record of successfully identifying, buying and integrating smaller software companies." It projects a compounded annual revenue growth rate of 12% during the next five years, which includes additional revenues from the acquisition of Sun. Shares are up 4% this year after gaining 28% last year.

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