Oracle Needs To Start Clocking Some Real Growth

It’s been a long time since I’ve written on Oracle (ORCL), mostly because it gets kinda boring saying the same things about the same companies - there are only so many ways to say “They generate good cash flow, but they haven’t made the right strategic choices to drive meaningful growth”. Since that last write-up, where I thought the shares had some value but weren’t necessarily compelling, they have generated a total return of around 33% - better than the S&P over that time, but below the returns from the likes of Microsoft (MSFT), Salesforce.com (CRM), and SAP (SAP).

Not a lot has changed. Oracle hasn’t seen a mid-single digit quarterly billings growth rate since mid-FY’18, though an easier comp in this year’s fourth quarter should allow another one. I like the growth in Fusion and opportunities like Gen2 OCI and Autonomous DB, but to borrow a concept from hockey, Oracle strikes me as a company that’s always chasing the puck, not one that reads the action on the ice and skates to where the action will be. The shares do look modestly undervalued, and I don’t think investors will get hurt badly here (unless the entire market, or at least the tech sector, gets trashed), but I also don’t think they’ll outperform over the long term with Oracle.

 

Read more here: 

Oracle Needs To Start Clocking Some Real Growth

Like Other Old-Tech Names, Oracle's Value Is Tied To Its Ability To Reignite Growth

Reading the sell-side research on Oracle (ORCL), I’m struck by how frequently the analysts benchmark Oracle’s valuation multiples (whether it’s P/E, EV/FCF, EV/revenue, et al.) against the peer/industry group in an attempt to make the “Oracle is undervalued” case, but neglect to benchmark the company’s revenue growth rate. While margins and free cash flow certainly do matter, revenue growth is a significant near-term driver for valuation multiples, and Oracle’s growth rate is much more in the CA Inc. (CA)/IBM (IBM) neighborhood than the Microsoft (MSFT)/Adobe (ADBE) neighborhood of older tech stocks.

Given the weak growth rate, the recent trends in Oracle’s position in sell-side CIO surveys, and the company’s ongoing challenges with the on-premises-to-cloud transition, I can’t work up much enthusiasm for the stock. While many old-tech companies have faced challenges in their attempts to renew themselves and remain competitive (Microsoft had its issues, IBM is still in the middle of them…), I just don’t see enough of a discount here to take on the incremental execution risk.

Read more here:
Like Other Old-Tech Names, Oracle's Value Is Tied To Its Ability To Reignite Growth

Cross-Selling Can Drive Meaningful Growth For Medidata Solutions

There's really no "steady state" for growth tech companies, and while Medidata Solutions (MDSO) has built a strong business with its cloud-based platform for the management of clinical development programs, management cannot afford to rest on its laurels. That's particularly true given that revenue growth decelerated through 2017 and both subscription revenue and backlog growth came in a little slower than expected.

With around 50% share and more than 80% of the top pharma companies in hand as clients, Medidata's growth is likely to come more from expanding its share of wallet with customers and selling them on the value of its offerings beyond its core RAVE electronic data capture (or EDC) platform. Given the increasing complexity and cost of clinical development, I believe Medidata has a better than fair chance of doing that, but rising competition is a threat. Even so, while I wouldn't care Medidata conventionally cheap, the valuation is reasonable enough to merit a closer look.

Read the full article here:
Cross-Selling Can Drive Meaningful Growth For Medidata Solutions

Varonis An Interesting Play On New Corporate IT Demands And Threats

Enterprises generate tremendous amounts of data and collecting, aggregating, interpreting, and securing it is a major set of challenges for IT departments. Varonis (NASDAQ:VRNS) is an interesting take on that reality, as well as the increasing realization that sometimes the greatest threats to a company's IT/data security come from within, as the company's platform of products is designed to collect, analyze, and help manage large amounts of user-generated unstructured data that exist within a corporate/enterprise IT environment.

Varonis shares are up about 50% over the past year, but still more than a third below their debut price, as the company has had its challenges living up to initial expectations regarding license growth and margin leverage.

Although Varonis's addressable market may well be quite large (multiple billions of dollars), operating leverage is a tricky question and competition from large established players like Symantec (NASDAQ:SYMC) and Dell, not to mention small upstarts, is unlikely to lessen from here. Taken in the context of growth software stories, Varonis isn't that expensive, though, and the tight bunching of sell-side expectations leads me to think that the shares could react strongly to surprises (good or bad).

Click here for more:
Varonis An Interesting Play On New Corporate IT Demands And Threats

Seeking Alpha: Is NCR Still A Sheep In Wolf's Clothing?

NCR (NYSE:NCR) has generally told a good story over the years, pointing to the emerging market growth opportunities in ATMs, the growth offered by branch transformation and increased service offerings in the U.S. banking sector, and the opportunities in retail and hospitality, particularly from software. It hasn't really worked out, though. The company's revenue has been growing modestly on a constant currency basis, and although the company has made strides with its free cash flow generation, the shares are down about a quarter from when I last wrote on them about two years ago.

I don't disagree that there are growth opportunities in the markets that NCR serves that could underpin mid single-digit or higher long-term growth. The problem, in my view, is that companies like Oracle (NYSE:ORCL), VeriFone (NYSE:PAY), Ingenico (OTCPK:INGIY), and Global Payments (NYSE:GPN)/Heartland Payments (NYSE:HPY) have increasingly blurred the lines in the hardware and software spaces within retail and hospitality and I'm concerned that NCR just doesn't have the vision and the portfolio to really leverage those opportunities.

The upcoming Investor Day could be an opportunity for the company to lay out some bold transformative strategies for the company, but I'm very concerned that it'll be more of the same, (a lot of promises, but weak delivery) and I just don't see a reason to mess around with a company that has had numerous opportunities to reestablish its growth credibility.

Follow the link to continue:
Is NCR Still A Sheep In Wolf's Clothing?

Seeking Alpha: The Cloud Tail Keeps Wagging Oracle

I look at Oracle (NYSE:ORCL) for largely the same reasons I look at companies like Cisco (NASDAQ:CSCO) - the search for relatively less volatile, undervalued, big-cap tech stories that can offset the risk of owning a collection of more aggressive plays. In the case of Oracle, though, I think I've found more things that concern me than encourage me, but those are short-term issues that I believe the company can address. What's more, the valuation would seem to suggest that a lot of these worries are in the price, and that this one may be worth a closer look.

Read more here:
The Cloud Tail Keeps Wagging Oracle

Seeking Alpha: Growth Is The Question, Answer, Problem, And Solution For CA, Inc

The story remains frustratingly consistent at CA, Inc. (CA). In a software investing world, where share price performance is often correlated pretty closely with revenue growth and margins, CA scores strongly on the second metric, but consistently poorly on the first. The basic investment thesis at CA hasn't really changed much in several years now - the mainframe business is an excellent source of high-margin revenue and cash flow, but the company just cannot seem to generate enough growth in the Enterprise business. Talking about improved go-to-market strategies and more consistent sales execution hits the right buzzwords for the sell-side community, but it's hard to say that the implication in CA's price of little-to-no growth unfairly maligns the company.

Read more here:
Growth Is The Question, Answer, Problem, And Solution For CA, Inc

Seeking Alpha: TIBCO Beats, But There's A Lot Left To Prove

Investors waiting for the "all clear" on TIBCO (TIBX) continue to get mixed messages. The company certainly had one of the strongest quarters for infrastructure and billings in many quarters, but the easy year-ago comp mutes some of the enthusiasm, particularly when it is clear that the key analytics business Spotfire continues to decelerate. A recent change in executive incentives could mark a shift toward a more margin-centric approach, but it remains to be seen whether growth in areas like analytics, ESB, and cloud can offset what looks like a slowing core business.

Talking about value is tricky in tech, as investors so often reward growth irrespective of value. Provided that TIBCO can improve margins, a high single-digit FCF growth rate seems plausible and both a DCF and EV/rev approach suggest these shares remain undervalued.

This link leads to the rest of the story:
TIBCO Beats, But There's A Lot Left To Prove

Seeking Alpha: Aspen Technology - Trees Don't Grow To The Sky

I'm a fan of the industrial and process automation sector, as I believe automation is a major factor in reducing operating costs across a variety of industries. As a leading provider of process optimization software, and one of the very few that is not captive within a much larger company, makes Aspen Technology (AZPN) a company worth knowing.

Valuation is problematic here. A forward EV/EBITDA ratio of over 31 and a forward EV/revenue ratio of over 10 certainly underline some of my concerns. Even though potential long-term free cash flow growth of 10% is quite attractive, it takes some pretty unconventional thinking to argue that Aspen is any kind of bargain today.

Read more here:
Aspen Technology - Trees Don't Grow To The Sky

Seeking Alpha: Vocus May Struggle To Exceed Even Modest Expectations

A lot of companies are trying to build models around enterprise SaaS, but talking about "the next" Salesforce.com (CRM), NetSuite (N), or Marketo (MKTO) is a lot easier than living up to it. That brings me to Vocus (VOCS), a small-cap SaaS public relations and marketing company that has been having a rough go of it.

I decided to look into Vocus to see if the Street's opinion of the company was too bearish. Given the weak trends in bookings and revenue and the uncertain value proposition that the company offers, not to mention its weakening legacy PR business, I'm not sure that's the case. It doesn't take all that much growth to drive a much higher fair value than today's price, but I'm not sure the company can manage all that much growth without some extensive changes.

Read the full article here:
Vocus May Struggle To Exceed Even Modest Expectations

Seeking Alpha: AudioCodes May Need A Breather, But The Company's Making Progress

For all of the companies that talk about restructuring and refocusing and go nowhere with it, some do turn a corner and start delivering improved financials. I think AudioCodes (AUDC) belongs in that second box, as the company's efforts to refocus itself around enterprise VoIP, and Microsoft's (MSFT) Lync in particular, have already started to pay dividends.

The shares are already up more than 250% from last year and well off the sub-$1.50 lows. Even so, the company still has low institutional ownership and minimal sell-side support. As I believe that smaller enterprises will start pushing money-saving SIP trunking and unified communications up the list of spending priorities, I think AudioCodes has a good market opportunity ahead of it. While my base-case assumptions don't suggest huge cash flow-based upside at this point, I won't be that surprised to see AudioCodes outperform over the next few quarters and support even stronger long-term projections (and a higher fair value).

Please follow this link to read the full article:
AudioCodes May Need A Breather, But The Company's Making Progress

Investopedia: Salesforce.com Shows Some Reacceleration

I seriously doubt anything will ever quell the heated arguments over Salesfore.com (NYSE:CRM), it's future prospects, and its valuation, but the company's fiscal second quarter earnings are likely to give the bulls a little extra ammo for the time being. Salesforce.com remains an expensive stock with questionable operating leverage, but it also remains a share gainer in a large market. Moreover, while stocks like Salesforce.com and Workday (Nasdaq: WDAY) aren't my cup of tea at all as an investor, I know better than to play chicken with a freight train.

Please follow the link below to continue:
http://www.investopedia.com/stock-analysis/083013/salesforcecom-shows-some-reacceleration-crm-wday-ibm-orcl.aspx

Investopedia: Workday Surfing The SaaS Wave

Emerging ERP vendor Workday (Nasdaq:WDAY) is one of the most expensive names in the software space today, as investors are seemingly happy to pay huge multiples for shares in a company that many believe can seriously challenge large incumbents like Oracle (Nasdaq:ORCL), SAP (NYSE:SAP), and Microsoft (Nasdaq:MSFT). So long as the company can continue to deliver growth ahead of demand expectations, the party will most likely continue and it won't surprise if Workday's shares hit three digits at some point in 2013. That said, this is a story where valuation leaves no margin for error, so investors should understand what they're getting into before buying shares.

Please continue here:
http://www.investopedia.com/stock-analysis/082813/workday-surfing-saas-wave-wday-orcl-sap-msft.aspx

Investopedia: Is Improving IT Demand Enough To Maintain Teradata's Rebound?

The rise and fall of Teradata (NYSE:TDC) over the past two years is a good lesson in the pitfalls of theme investing in tech. Teradata enjoyed a great run on the back of “Big Data” hype and shares of this data analytics company definitely overshot fair value. Once IT budgets came under pressure, though, Teradata's reported results showed just how sensitive the company remains to on-the-ground IT demand. While the shares have bounced off their 52-week lows and the company is a credible player in an important market (the collection and analysis of enterprise data), it's hard to call this stock a bargain today.

Please follow the link to continue:
http://www.investopedia.com/stock-analysis/082613/improving-it-demand-enough-maintain-teradatas-rebound-tdc-ibm-orcl-emc.aspx

Investopedia: Microsoft Critics Get Their Way, As Ballmer Announces Impending Retirement

In all the time I've written on Microsoft (Nasdaq:MSFT) it seems like readers/investors always came together on at least one topic – they really didn't like CEO Steve Ballmer. While I think Ballmer has often gotten a bad rap and that Microsoft is better-positioned in enterprise software and services than commonly believed, trying to make that case is tantamount to spitting into the wind.

Under Ballmer's leadership, Microsoft has lost close to half of its value. Again, I think you could argue that almost anybody taking the job was going to preside over a significant erosion in market cap, as Ballmer took the CEO position of Microsoft just three months before the tech bubble peaked. In any case, I will side with the critics who feel that, whatever the quality of Ballmer's vision for Microsoft, he did a poor job of selling the Street on it.

Now they won't have Ballmer to kick around much longer. On Friday morning, Ballmer announced his intention to retire from the job within 12 months, with the exact timing tied to the search committee finding a new CEO for the company.

Read more here:
http://www.investopedia.com/stock-analysis/082313/microsoft-critics-get-their-way-ballmer-announces-impending-retirement-msft-ibm-orcl-goog.aspx

Investopedia: Workday Working Some Major Market Mojo

One way or another, Workday (Nasdaq:WDAY) is going to be a fun stock to watch. Investors angered by the rich valuations once awarded to Salesforce.com (NYSE:CRM), and there certainly were plenty of them, are probably going to be apoplectic over the valuation on the shares of this fast-growing SaaS enterprise software vendor. Although I can't conceive of a credible scenario in which these shares look anything close to fairly valued, I do believe the company will be quite successful and the interplay between the company's rapid growth and share gains in the enterprise resource management/planning (ERM/ERP) market and its valuation in the stock market will be very interesting to watch over the next few years.

Please read more here:
http://www.investopedia.com/stock-analysis/082013/workday-working-some-major-market-mojo-wday-orcl-sap-msft.aspx

Investopedia: CA Getting Some Benefit Of The Doubt, But It Must Deliver Growth

I carried the “CA Technologies (NYSE:CA) is too cheap” torch for a while, and though the stock is up about 20% since my last article, better than IBM (NYSE: IBM) and in line with Oracle (Nasdaq:ORCL), the nearly 10% underperformance relative to the S&P 500 precludes any victory dance. On the other hand, the stock is well ahead of the S&P 500 on a year-to-date basis, and it sounds like the Street is increasingly on board with CEO Michael Gregoire's plans to reinvigorate growth at this large enterprise software company.

Read more here:
http://www.investopedia.com/stock-analysis/081413/ca-getting-some-benefit-doubt-it-must-deliver-growth-ca-ibm-orcl-crm.aspx

Investopedia: Another Bad Quarter Highlight's Microsoft's Growth-Vs-Value Problem

Just when you think you've found a fool-proof business, a better fool evolves to mess things up. I've long thought that Microsoft (Nasdaq:MSFT) shares seemed much too cheap, but held off on buying for fear that ongoing operational shortcomings would obscure that value. With a fiscal fourth quarter that was weak across almost every metric, it looks like that has come home to roost.

Although I think the base Windows, Office, and server/tools businesses are still valuable, it's increasingly difficult to trust management to adequately execute or communicate their plan. So while I still think these shares are too cheap on a cash flow basis, it's likely going to take something more dramatic than another reorganization or stabilization in the PC business to get these shares closer to fair value.

Please follow the link for more:
http://www.investopedia.com/stock-analysis/071913/another-bad-quarter-highlights-microsofts-growthvsvalue-problem-msft-ibm-orcl-nok.aspx

Investopedia: Even IBM Subject To Gravity

Strong market share in a variety of hardware, software, and IT service markets makes IBM (NYSE:IBM) a great company, but it doesn't immunize investors against the risks of holding an overpriced stock. To that end, while I've liked the company for some time, I've also thought the shares were too pricey. With the stock down about 5% over the past quarter (and underperforming the S&P 500 by about 14%), though, IBM shares have gotten closer to a potential buy point.

Please click below for more:
http://www.investopedia.com/stock-analysis/071813/even-ibm-subject-gravity-ibm-orcl-hpq-acn.aspx

Seeking Alpha: Software AG - All The Buzz, But Can It Deliver The Honey?

If you're a software company these days, you pretty much have to be positioned for Big Data, Cloud, Mobile, and Social/Collaboration to get investor attention. The extent to which these are real and meaningful concepts or just buzzwords is a topic for another day, but the point stands that Software AG (STWRY.PK) has gone out of its way to make sure you know it is targeting these markets.

The question is whether or not the company can deliver. Software AG is a veteran company, but its recent record of in-house development isn't all that impressive and suggests promised growth may have to come from the checkbook (M&A). What's more, it's an open question as to whether the company can deliver sustained profitable growth. If things work out well, this stock could trade more than 30% above today's level, but execution risk is a serious issue with this stock.

Read the full article here:
Software AG - All The Buzz, But Can It Deliver The Honey?