Oracle Corporation (ORCL)

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17 Φεβ 2014 (πριν από 3 χρόνια και 5 μήνες)

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Oracle Corporation (ORCL)

Covering Analyst: Joshua Jordan

jjordan3@uoregon.edu

Oracle History


Founded in 1977


Larry Ellison, Bob Miner, and Ed Oates


Incorporated in 1977


A Series of Re
-
Incorporations


Oracle Systems merged with Oracle Corporation


June 1, 1995


Many Acquisitions

Business Overview


Software


Hardware


Services



Americas (52%)


EMEA (31%)


Asia Pacific (17%)

Software Publishing Industry


Low Concentration


High Competition



Enterprise Software
Publishing Sub
-
segment


High Concentration

20.9%
7.0%
5.6%
66.5%
Software Publishing Market Share
Microsoft
Oracle
IBM
Other
Total: $183
billion
Software Business


Software Licenses


Database Software


MySQL


Middleware Software


Fusion Middleware


Business Intelligence, Cloud Application Foundation, Data Integration, Java


Applications Software


Fusion Applications, Siebel, JD Edwards


Customer Relationship Management, Supply Chain Management, Financials


Hardware Business


Hardware Systems Products


Engineered Systems


Exadata, Exalogic, SPARC SuperCluster


Servers


SPARC microprocessor


Storage


Sun ZFS Storage Appliance Network Attached Storage


Operating Systems


Oracle Solaris

Services


Consulting



Managed Cloud Services



Education

Oracle’s Strategy


Retain customers through high
-
margin sales channels


Innovation through research & development


Acquisitions


Brand Name Growth


Product Integration

Revenue


Software


License Updates & Product
Support


New Software Licenses


Hardware


System Products


System Support


Services


Consulting, Cloud,
Education

43.67%
26.69%
10.31%
6.67%
12.67%
2012 Revenue
Software License Updates &
Product Support
New Software Licenses
Hardware Systems Products
Hardware Systems Support
Consulting, Cloud Services,
Education
47.42%
28.68%
7.88%
5.58%
10.44%
Projected 2018 Revenue
Software License Updates
& Product Support
New Software Licenses
Hardware Systems
Products
Hardware Systems
Support
Consulting, Cloud
Services, Education
Risks and Potential Drawbacks


Inexperience in Hardware Systems


Legal issues


Competition


Security Threats

Positives


Margin growth in nearly all revenue segments


Expansion globally


Elite
-
talent retention


Continued acquisition program


An expanding stock repurchase program and increasing
dividend

DCF Expectations


Slightly increasing COGS as a percent of revenue


Most costs increase slightly into terminal year


Personnel related


Tax rate of 24%


Accelerating/Decelerating rates as opposed to straight
-
line rates


Increasing capital expenditures and acquisitions

DCF Valuation (50%)


Possible reasons for price
differential


Market Risk Premium


Beta

Implied Price
35.06
Current Price
35.92
Overvalued
(2.39%)
Comparables Screening


Industry


Business Operations


Size


Beta


Growth


Margins

Comparables


Microsoft (MSFT)


40%


Intel (INTC)


5%


Salesforce.com (CRM)


5%


CA Technologies (CA)


30%


Red Hat (RHT)


20%

Forward Comparables Valuation (50%)


Discrepancies


Growth


Bottom
-
Line
Margins

Multiple
Implied Price
Weight
EV/Revenue
$27.75
0%
EV/Gross Profit
27.59
0%
EV/EBIT
39.22
25%
EV/EBITDA
38.02
50%
EV/(EBITDA-Capex)
44.47
25%
Market Cap/Net Income = P/E
97.92
0%
Price Target
$39.93
Current Price
35.92
Undervalued
11.16%
Final Valuation


Source
Implied Price
Weight
Forward Comps
$39.93
50%
DCF
35.06
50%
Price Target
37.50
Current Price
35.92
Undervalued
4.39%
Implied Price
Undervalued/(Overvalued)
Terminal Growth Rate
Terminal Growth Rate
37
2.3%
2.3%
3.0%
3.8%
4.5%
5.75%
40.5
40.5
42.8
45.9
50.6
6.25%
38.6
38.6
40.4
42.8
46.2
7.00%
36.2
36.2
37.5
39.2
41.4
7.75%
34.3
34.3
35.3
36.5
38.1
8.25%
33.2
33.2
34.0
35.0
36.3
Market Risk
Premium
Recommendation: Hold Tall Firs and Svigals


Strong brand name with history


Continued long
-
term growth


Acquisitions


High
-
margin sales channels


Revenue and margin growth in competitive industry


Marginal undervaluation

Questions