But Zacks Equity Research, in listing reasons to buy or sell Oracle stock in a late-December report, cites issues with the Sun acquisition as reason to sell. "While the acquisition of Sun makes Oracle the foremost player in the database software market, we remain concerned about the company's integration of Sun," Zacks said. "We believe that it will take years to provide incremental benefit and will come at the expense of relatively lower cash flow due to increased working capital requirements." The integration also pulls Oracle away from its traditional software-only business model, presenting a corresponding negative impact on margins, Zacks said.
Zacks also cites declining hardware revenues, putting pressure on the software segment to drive results. "We believe that lower hardware volumes will continue to hurt top-line growth going forward." Zacks also notes Oracle lost its patent infringement claims case against Google, which involved Java. "Oracle s strategy of earning incremental revenues by licensing the software received a significant blow following the Google judgment."
Countering Zacks, analyst Al Hilwa, of IDC, believes Oracle's Sun acquisition has likely helped Oracle. "I have no precise sense of this, but likely most gains were in the Exa-appliance line, which blends hardware and software in a single offering. Oracle was able to leverage Sun's hardware to create this new space, and from what we are lead to understand during their financial conferences, the revenue streams for these appliances has been on a great growth trajectory." Oracle also has likely been able to cross-sell to Sun customers who had not been Oracle customers, Hilwa said.
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