Q. Should I brace for the worst with my shares of Oracle Corp.? -- D.L., via the Internet
A. Like all technology firms, it is facing weakened economies in the United States and abroad that have a negative impact on the companies that typically buy its products.
Oracle shares (ORCL) are down 12 percent this year following last year's 32 percent increase and a 40 percent gain in 2006. The company has expressed caution about its near-term prospects.
Nonetheless, its dominant position in database software gives it a degree of pricing power most other technology companies can only dream about. At midyear it enacted 15 percent to 20 percent across-the-board price increases for its U.S. customers.
It also possesses the solid finances and cash flow to grow by acquiring companies, having spent more than $30 billion over the past three years to buy smaller software firms. Its $8.5 billion acquisition of BEA Systems closed in April.
The company's market share in database software, which is the foundation of every information system, edged up to 49 percent last year from 48 percent in 2006, according to the Gartner market research firm. IBM ranked second at 21 percent and Microsoft third with 18 percent.
Oracle also is gaining ground in enterprise software, those integrated applications that support and streamline business activities. It has lately expanded into applications for the insurance and health-care industries.
Presence in a variety of information technology areas allows it to offer "one-stop shopping" to companies that prefer not to have to deal with multiple providers.
Consensus rating of Oracle shares by Wall Street analysts is "buy," according to Thomson Financial, consisting of 11 "strong buys," 10 "buys," six "holds" and three "underperforms."
Chief Executive Larry Ellison, the largest holder of Oracle shares, has a strong personality and no compunction about reveling in a number of extravagances, such as a yacht that reportedly cost $200 million to build.
The company faces increased competition from lower-cost support providers for Oracle products. Germany's SAP is a formidable foe and the leader in business applications, and Oracle's database software is a maturing business.
Earnings are expected to be up 15 percent for the current fiscal year ending in May and 15 percent for the following fiscal year. The five-year annualized return projection of 14 percent is in line with the application software industry estimate.
Q. I am unhappy with my shares of Fidelity Value Discovery Fund. Are they still worth holding? -- P.F., via the Internet