SAP SE (ADR) (NYSE:SAP) was ordered to pay $359 million in an appeals court ruling, in which Oracle Corporation (NYSE:ORCL) was attempting to claim its initial ruled winnings against SAP of $1.3 billion. Ultimately, the judge disagreed with the amount and posted a lower settlement price that was deemed fair and just for SAP. The whole court battle started after Oracle accused SAP of copyright infringement, particularly with SAP’s owner manuals and other technical information. These bitter rivals have met in the courtroom before and certainly will likely be there again one day. For now, Oracle claims victory and a nice cash settlement.
Oracle Corporation (NYSE:ORCL) has some attractive fundamentals at this point as well. Price to forward earnings comes in at 12.32, compared to the industry average of around 30. Additionally, Oracle has some very impressive margins: gross margin of 81.10%, operating margin of 39.20%, and profit margin of 28.40%. Additionally, analysts from DA Davidson upgraded shares of Oracle from a neutral to a buy rating on October 6, 2014. The other major news out of Oracle in recent months is the fact that Oracle CEO and founder, Larry Ellison, will be resigning from the CEO position, but will remain “full time” employment at Oracle, as the Chief Technology Officer and executive chairman of the board. The new CEO position will be co-head by Mark Hurd and Safra Catz.
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SAP SE’s forward earnings
German-based SAP SE (ADR) (NYSE:SAP) has some intriguing aspects with price to forward earnings of 14.27 and margins of 70% gross margin, 28.30% operating margin and 19% profit margin. As you can see, Oracle is cheaper on a forward earnings basis and contains better margins. While this is not a dead-on reason to go out and buy Oracle, SAP has struggled this year with a year to date performance of -22%, compared to Oracle’s year to date performance of 7%. Analysts are concerned with SAP’s cloud transition and certainly this settlement does not help ease the pain at all.
However, the differences can be chopped up to each company’s environment. Oracle is based in Redwood Shores, California, just 20-30 minutes from the heart of the Silicon Valley. While Oracle does work internationally, business environment is much more preferable in the US right now. This is the opposite for SAP SE (ADR) (NYSE:SAP). Europe is floating back between deflation worries and growth worries, this has an undesirable effect on business confidence and activity in the region. SAP is going to be more impacted by what is going on in Germany and rest of Europe, compared to Oracle Corporation (NYSE:ORCL) . This largely could explain why SAP has underperformed this year. Overall, Oracle made a nice payday today, but the rivalry between these two continues strong.