Interesting article from the fool folks they have probed into Oracle's cash flow issues and what they have found is for your average investor the Oracle numbers do not add up because Larry is very trigger happy with his purchases .Add up three buyouts (Peoplesoft,Retek and Siebel )-- and these are not all the acquisitions that are taking place -- and you are talking about $15.8 billion. So, what is Oracle trying to do? Its mainstay database and middleware business was three-quarters of new software license revenue last quarter. It's a slow growth business, but very lucrative. Business software, which can also help sell database products, is growing faster and is lucrative, too.
Let's look at the cash
Bolstered by PeopleSoft, sales last quarter increased 19% over the year-ago quarter. But while the top line bloomed, the bottom line faded. Net income fell 2%.
The numbers were not pretty for free cash flow either. For the last six months, it's down 2%.
So, after spending $10.3 billion for an acquisition, net income and free cash flow are headed down. And, there is another multibillion-dollar purchase on the way.
Oracle is bulking up for its fight with SAP for ERP supremacy and is trying to keep Microsoft at bay in the lower end of the ERP market. When you consider that Oracle is trading for 22.5 times trailing annual earnings and is expected to grow earnings 11% a year for the next five years, there is hardly reason to expect it to outperform the market averages.
If you are still aching to buy Oracle, It isn't pretty. It looks that way because over the last five years, Oracle has compounded earnings by a negative 1.3% (according to Yahoo! Finance). Guess what? Net income fell slightly more than that last quarter. This company is in a groove, and it isn't headed up.