Oracle a Winner Despite Outcome in Google Suit

NEW YORK ( TheStreet) -- There's always been a lot to like with database giant Oracle ( ORCL) -- even though its CEO Larry Ellison tends to go out of his way to step on a few toes and dare you to make him apologize for it. Hewlett-Packard ( HPQ) and Google ( GOOG) are a couple of examples of recent rifts with Oracle.

Ellison has always had an eccentric personality and Oracle has taken on a reputation of being somewhat of a nonconformist company. The company doesn't seek out confrontation, but has always had a unique way of managing its competition. It's strategy has worked brilliantly until its match-up against Google over its use of RIM's Java application. That fight is ongoing and the outcome is unclear.

Oracle vs. Google: Is It Worth It?

On Monday, a federal jury determined that Google's Android software for mobile devices did in fact infringe on Oracle's copyrights of Java -- a programming system that Oracle owns by virtue of its Sun Microsystems acquisition two years ago. But the court was not able to answer the most important claim of copyright violation.

At this point it is hard to say with any degree of certainty whether or not it was a "real" victory since the jury was unable to conclude whether Google's use of Java was legally permitted under "fair use" protection.

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Oracle was seeking damages of up to $1 billion dollars, but it is unclear whether this will be awarded. On the announcement, Google issued a request to the judge to declare a mistrial, suggesting that the issues of fair use and infringement are one and the same and therefore linked. The judge advised that the request would be considered but also issued an order to commence the next phase of the trial.

At this point, investors have to wonder how this battle with Google will impact Oracle's performance both in near and long term. Is it worth it?

There are numerous examples where litigation has impacted a company's performance -- Microsoft's ( MSFT) antitrust battles with the government in the mid-to-late 90's were said to have had a significant adverse affect on the company's performance by creating a distraction. But if any management team is able to handle this challenge and overcome the obstacles, it is Oracle's.

Regardless of the outcome, there will likely be some appeals from both sides. Oracle deserves a considerable amount of credit for defending its turf. As an investor, I appreciate what it has done to protect my interest and I really don't think that it had any choice but to file suit. If nothing else, it serves to put other potential threats on notice that the company does not plan to sit idle if it feels a violation has occurred from one of its properties.

Chess Pieces

Oracle's lawsuit continues a string of what I would consider calculated decisions regarding the company's rivals -- and I don't think Oracle cares very much about being disliked. The company understands its position within the industry and it knows the value of its assets. Also, it's suit against Google just might have been an effective, if indirect, tactical move to position itself for a better opportunity down the road.

One such opportunity would be within the cloud solutions space. Investors already caught glimpses of this strategy when Oracle acquired RightNow, the cloud-based customer experience suite designed to help organizations deliver customer experiences across the Web and social networks.

Oracle also has what is called the Exalogic Elastic Cloud X2-2 which provides a individualized platform ideal for a wide range of enterprise application strategies. It is certain to compete favorably with Microsoft's Azure platform as well as those offered by Salesforce.com ( CRM), EMC ( EMC) and IBM ( IBM).

Bottom Line

From an investment standpoint, it is hard to look at Oracle's strong cash position, its deep market penetration and incredibly low price-to-earnings of 14 and not realize just how undervalued this stock is -- particularly when compared to other rivals such as Salesforce.com and EMC.

Furthermore, the company's innovative strategies have positioned its stock as one of the bright spots in today's recovering market. Even on the most conservative assumptions I still see shares having 42% movement to the upside, approaching $40 over the course of the next 12 to 24 months. Value investors should consider making a play for Oracle at current levels.

At the time of publication, the author was long ORCL and MSFT.

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