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Oracle Stands Tall as Economy Thaws

The software maker could be a good bet in a healthier IT spending climate.



) -- Database giant


(ORCL) - Get Report

, which reports its first-quarter results after the market closes Wednesday, may offer upside to recession-weary investors as the tech sector begins its recovery.


antitrust concerns

hanging over its $7.4 billion



Sun Microsystems


, the software maker is seen as a good bet in an improving economy.

"We believe a combination of new product releases coupled with gradually improving corporate IT spending and accretion from the anticipated Sun acquisition makes Oracle an attractive investment," wrote Ross MacMillan, an analyst at Jefferies & Company, in a note Wednesday. MacMillan also raised his Oracle price target from $24 to $26.50.

Specifically, MacMillan sees growth opportunities around Oracle's recently announced

Middleware 11g

product and its forthcoming raft of new Fusion applications.

Analysts surveyed by Thomson Reuters expect Oracle to post revenue of $5.25 billion and earn 30 cents a share, as

upgrades and maintenance contracts

offset weakness in new business.

Oracle also received a


rating from the Ratings recently, and its stock has risen more than 28% this year.

The Sun acquisition, however, has hit a speed bump, and was recently delayed by a European Commission antitrust probe into the merger. Already approved by the


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and by Sun's shareholders, the deal is undergoing close scrutiny on the other side of the Atlantic. EC officials are chiefly concerned about Oracle getting its hands on Sun's MySQL database and thus limiting the choice for database software.

Jefferies & Company's MacMillan is not unduly concerned, and thinks that Oracle can still reach its target of adding 15 cents to non-GAAP earnings in the first full year after closing the acquisition. "

The Sun Micro delay is painful, but still accretive," he wrote. "To achieve target accretion, we believe Oracle needs to cut around 25% from run-rate opex (which will fall further due to Sun's own ongoing restructuring efforts) and this remains a plausible cost reduction in our view."

The Redwood Shores, Calif.-based firm had expected to close the deal sometime during the summer, although the EC has until Jan. 19, 2010, to either clear the deal or prevent it.

Oracle, which sent shockwaves through the tech sector when it bought struggling Sun earlier this year, unveiled the latest version of


product late Tuesday, which it describes as the world's first Online Transaction Processing (OLTP) database machine.

Originally developed with


(HPQ) - Get Report

, Exadata is aimed squarely at companies that want to handle large volumes of data quickly. Exadata version 2, however, is built with Sun hardware and Oracle software and represents a


for H-P.

Oracle, which competes with


(IBM) - Get Report



(MSFT) - Get Report



(SAP) - Get Report

, met analysts' revenue expectations in its


results, but saw its profit slip thanks to the impact of foreign currency.

Shares of Oracle dipped 55 cents, or 2.43%, to $22.11 Wednesday, reversing the modest rally in tech stocks that saw the Nasdaq rise 0.4%.