Case Study on Oracle

Case 4: Oracle Systems Corporation

Point-of-View

The group is taking the point-of-view of a stockholder of Oracle Systems Corporation who bought his stocks at $6.00 per share.

Case Background

Oracle Systems Corporation (OSC) is the market leader in the development of software for database management.  The Corporation strategies are:

1. Sell Aggressively;
2. Maintain technology and product leadership;
3. Diversify into related fields;
4. Expand Internationally.

As a result of these strategies, OSC stock prices rose from $2.00 per share in 1986 to $28.375 in early 1990.  These stock price increases was a direct result of unparalleled recorded growth of OSC at 118% compounded annual sales growth.

In  1990, however, analysts were questioning the sustainability of such growth.  In a disclosure in September 1990, OSC for the first time reported its first ever-quarterly loss.  OSC further stated that it is shifting strategies, strategies that emphasizes profitability and product quality instead of focusing on market share and sales growth.  OSC also decalare that it reduce its growth projections for the year from 50 % to 25%.

Seemingly, this drastic change in strategies of OSC did not sit well with the market as its stock prices dove from $28.375 to $8.125.

Problem Statement

As a “long-term” holder of shares of OSC, is it sensible to sell all the shares held of OSC as there is no possibility of growth or buy more shares at current low prices  since OSC can turn-around from this problem they are confronted with?

Analysis

Plus Factors for OSC

1. Steady Net Income Growth
2. Steady Revenue Growth
3. DBMS Market Not Yet Saturated
4. Shift to a more Conservative Strategy
5. Change in Management

Minus Factors for OSC

1. Very High Accounts Receivable
2. Low Cash Inflow
3. Large Long Term Debt
4. Very Competitive Market

Conclusion