Oracle

Executive Summary

Oracle Corporation is a significant company in the information technology world. The company has developed high end solutions to the world. In the stock market, the company has been fluctuating due to an array of issues attributed to the company’s internal operations and its external environment. The general trend of the company is reducing average returns to the investors which is a worrisome trend. The industry has also been facing the same fate indicating that the Information Technology market has been facing an unpredictable environment which has been determined to be caused by aspects such as international politics, cyber security, and internal wrangles.

Introduction

Stocks are often unpredictable. Investors as such, need to exercise caution when being active in the market. To exercise caution, investors need to have information and understanding of how markets work. This paper will focus on Oracle Corporation (Oracle). The first part of the paper will look at how Oracle’s stock has been performing in the market in the recent past through assessing its average return. The same kind of analysis will be conducted on the industry and reasons for fluctuations in the market will be attached to the swings thus identified as is expressed in Appendix 1.

Analysis of Oracle

Oracle Corporation (Oracle) is a relatively young company in relative terms having been incorporated in October 2005. The company cannot be underestimated when it comes to its capabilities in the technological world. Oracle deals with corporate information technology on three major fronts; application, platform, and infrastructure. In simpler terms, the company provides software, hardware, and services to organizations. Its competition includes heavyweights such as Microsoft, IBM, Intel, SAP, Amazon Inc, Hewlett- Packard Enterprise, and Workday Inc. (Reuters, 2018). 

As it can be seen from the graph below, the general movement of the average return of stocks for Oracle has been moving downwards as indicated by the trend line. An investor in the stocks experiences severe fluctuations since the returns are not settled on a defined and particular trajectory. 

What Makes the Stocks of Oracle Fluctuate Such Much?

The stocks of Oracle are having very different average rates of returns, a concept that can be examined. To begin with, Oracle operates in a highly dynamic and competitive environment. The Information Technology world does not allow one company to be king for long. As such, Oracle has had its fair share of prominence as well as downfalls. Investors in the technology sector will often be keen to the news and the company that makes news first, gets its stocks have a positive effect, often to the detriment of others in the market. 

The interaction of the external factors such as prices of oil have a dimension on the profitability. According to Sadorsky (2012), there is a relationship between stocks of energy companies and those of technology companies. These two industries tend to move in the same directions. The performance of energy companies is often a pointer to a thriving economy. As such, companies are in a position to absorb technology due to increased fortunes. At such a time, the stocks of Oracle will move upwards and the opposite happens when energy company stocks get depressed. Sadorsky (2012) assessed the impact of clean energy companies in the combination and determined that clean energy company’s stocks are more correlated to technology companies. The main reason is that clean energy companies are often deemed sustainable and thus, have a more impact than their ‘dirty’ counterparts. For instance, in December 2012, Tesla, a champion for clean energy announced positive cash flows. As a result, the market responded in kind, even to other companies. 

International economics are often indicative of the response technology stocks will get in the market. Oracle, by virtue of being an American company, is often caught in the cross-hairs when there is a diplomatic spat between America and other nations. For instance, the decline in average return of Oracle stocks between the last quarter of 2017 and the first quarter of 2018 can be described to be partially related to the nuclear spat between North Korea and America. Each was threatening the other with nuclear attacks and investors often shy from such proclamations. When such tensions simmer down, the business environment often recovers and things point upwards as further seen from the graph. 

I.T Industry Performance

The graph below shows the general performance of the I.T industry were Oracle is a dominant player. 

From the graph, it can be established that the industry has been performing just like Oracle stocks have been on the downward spiral. Technology companies have been facing different challenges in their operational environments due to different factors. To being with, the industry is tightly interrelated and the mistake of one, often gets to the other. when the public wakes up to news of how the governments have been snooping around private information, how unsafe personal and corporate data is unsafe, and reports of manipulation of elections by technology companies, the glamour of tech companies then fades. All are made guilty through association. For instance, Sony was hacked into in November of 2014 and this event shook the I.T sector. As a result, the stocks of companies started plummeting due to loss of public trust. In June 2016, an Oracle whistle blower raised queries about the cloud accounting behavior of the company as reported by Reuters (2016). Such news takes a jab on the potential of the company and reflects wrongly on the industry. 

Conclusion

Oracle is a highly capable company with admirable products in the market place. The company however finds itself in an intricate web of international economics, guilt by association, and a volatile industry which is highly reflective of the perceptions and fears of the public. Oracle has been found to have a rather steep decline when compared to the industry’s average return. This is a precarious position especially when considering investors in the company. The management of the company should take these cues seriously and adopt strategies that are consistent with a continuously improving investor condition. As the world gravitates towards being highly interconnected, with online solutions to almost everything, it follows that mistakes and miscalculations are bound to happen. As a consequence, major players such as Oracle are often on the receiving end as investors flex to find their lines of best fit. The market has been found to be reactionary, and negative news or publicity often catches up with the industry and its individual participants. Oracle has been determined to fall into this trap with reducing average return due to its mistakes, and those of its peers. An investor in the fragile I.T market should be consistent to ensure that they gain during periods of calm. 

References

Reuters , 2016. Oracle whistleblower suit raises questions over cloud accounting. [Online]
Available at: https://www.reuters.com/article/us-oracle-lawsuit-accounting-idUSKCN0YS0X1

Reuters, 2018. Oracle Corp (ORCL.N). [Online]
Available at: https://www.reuters.com/finance/stocks/company-profile/ORCL.N

Sadorsky, P. (2012). Correlations and volatility spillovers between oil prices and the stock prices of clean energy and technology companies. Energy Economics, 34(1), 248-255.

Appendix 

Appendix 1: Oracle Stock

Oracle Corp., Monthly, Quarter, and Annual Rates of Return
		Oracle Corp. (ORCL)				Standard & Poor’s 500 (S&P 500)
t	Date	Price(ORCL, t)	Dividend(ORCL, t)	R(ORCL, t)	R(Quarter)	R(Annual)	Price(S&P 500, t)	R(S&P 500, t)	R(Quarter)	R(Annual)
	Jun 30, 2012	29.70					1,362.16
1.	Jul 31, 2012	30.20	0.06	1.85%			1,379.32	1.24%
2.	Aug 31, 2012	31.65		4.58%			1,406.58	1.94%
3.	Sep 30, 2012	31.46		-0.60%	1.94%		1,440.67	2.37%	1.85%
4.	Oct 31, 2012	31.08	0.06	-1.03%			1,412.16	-2.02%
5.	Nov 30, 2012	32.18		3.42%			1,416.18	0.28%
6.	Dec 31, 2012	33.32	0.18	3.94%	2.11%	2.03%	1,426.19	0.70%	-0.34%	0.75%
7.	Jan 31, 2013	35.51		6.17%			1,498.11	4.80%
8.	Feb 28, 2013	34.24		-3.71%			1,514.68	1.09%
9.	Mar 31, 2013	32.33		-5.91%	-1.15%		1,569.19	3.47%	3.12%
10.	Apr 30, 2013	32.78		1.37%			1,597.57	1.78%
11.	May 31, 2013	33.78		2.96%			1,630.74	2.03%
12.	Jun 30, 2013	30.71		-10.00%	-1.89%		1,606.28	-1.52%	0.76%
13.	Jul 31, 2013	32.35	0.12	5.42%			1,685.73	4.71%
14.	Aug 31, 2013	31.86		-1.54%			1,632.97	-3.23%
15.	Sep 30, 2013	33.17		3.95%	2.61%		1,681.55	2.89%	1.46%
16.	Oct 31, 2013	33.50	0.12	1.34%			1,756.54	4.27%
17.	Nov 30, 2013	35.29		5.07%			1,805.81	2.73%
18.	Dec 31, 2013	38.26		7.76%	4.72%	1.07%	1,848.36	2.30%	3.10%	2.11%
19.	Jan 31, 2014	36.90	0.12	-3.35%			1,782.59	-3.69%
20.	Feb 28, 2014	39.11		5.65%			1,859.45	4.13%
21.	Mar 31, 2014	40.91		4.40%	2.23%		1,872.34	0.69%	0.38%
22.	Apr 30, 2014	40.88	0.12	0.22%			1,883.95	0.62%
23.	May 31, 2014	42.02		2.71%			1,923.57	2.06%
24.	Jun 30, 2014	40.53		-3.68%	-0.25%		1,960.23	1.87%	1.52%
25.	Jul 31, 2014	40.39	0.12	-0.05%			1,930.67	-1.53%
26.	Aug 31, 2014	41.53		2.75%			2,003.37	3.63%
27.	Sep 30, 2014	38.28		-8.49%	-1.93%		1,972.29	-1.58%	0.17%
28.	Oct 31, 2014	39.05	0.12	2.27%			2,018.05	2.27%
29.	Nov 30, 2014	42.41		7.92%			2,067.56	2.39%
30.	Dec 31, 2014	44.97		5.69%	5.30%	1.34%	2,058.90	-0.42%	1.41%	0.87%
31.	Jan 31, 2015	41.89	0.12	-7.05%			1,994.99	-3.20%
32.	Feb 28, 2015	43.82		4.40%			2,104.50	5.20%
33.	Mar 31, 2015	43.15		-1.55%	-1.40%		2,067.89	-1.77%	0.08%
34.	Apr 30, 2015	43.62	0.15	1.42%			2,085.51	0.84%
35.	May 31, 2015	43.49		-0.30%			2,107.39	1.04%
36.	Jun 30, 2015	40.30		-7.92%	-2.27%		2,063.11	-2.15%	-0.09%
37.	Jul 31, 2015	39.94	0.15	-0.52%			2,103.84	1.94%
38.	Aug 31, 2015	37.09		-7.68%			1,972.18	-6.68%
39.	Sep 30, 2015	36.12		-2.69%	-3.63%		1,920.03	-2.72%	-2.49%
40.	Oct 31, 2015	38.84	0.15	7.36%			2,079.36	7.66%
41.	Nov 30, 2015	38.97		0.33%			2,080.41	0.05%
42.	Dec 31, 2015	36.53		-6.68%	0.34%	-1.74%	2,043.94	-1.78%	1.98%	-0.13%
43.	Jan 31, 2016	36.31	0.15	-0.19%			1,940.24	-5.34%
44.	Feb 29, 2016	36.78		1.28%			1,932.23	-0.41%
45.	Mar 31, 2016	40.91		10.10%	3.73%		2,059.74	6.19%	0.14%
46.	Apr 30, 2016	39.86	0.15	-2.25%			2,065.30	0.27%
47.	May 31, 2016	40.20		0.85%			2,096.95	1.51%
48.	Jun 30, 2016	40.93		1.78%	0.13%		2,098.86	0.09%	0.62%
49.	Jul 31, 2016	41.04	0.15	0.63%			2,173.60	3.44%
50.	Aug 31, 2016	41.22		0.44%			2,170.95	-0.12%
51.	Sep 30, 2016	39.28		-4.94%	-1.29%		2,168.27	-0.12%	1.06%
52.	Oct 31, 2016	38.42	0.15	-1.84%			2,126.15	-1.98%
53.	Nov 30, 2016	40.19		4.40%			2,198.81	3.30%
54.	Dec 31, 2016	38.45		-4.53%	-0.65%	0.48%	2,238.83	1.79%	1.04%	0.72%
55.	Jan 31, 2017	40.11	0.15	4.50%			2,278.87	1.76%
56.	Feb 28, 2017	42.59		5.82%			2,363.64	3.59%
57.	Mar 31, 2017	44.61		4.53%	4.95%		2,362.72	-0.04%	1.77%
58.	Apr 30, 2017	44.96	0.19	1.20%			2,384.20	0.90%
59.	May 31, 2017	45.39		0.95%			2,411.80	1.14%
60.	Jun 30, 2017	50.14		9.47%	3.87%		2,423.41	0.48%	0.84%
61.	Jul 31, 2017	49.93	0.19	-0.04%			2,470.30	1.90%
62.	Aug 31, 2017	50.33		0.79%			2,471.65	0.05%
63.	Sep 30, 2017	48.35		-4.10%	-1.11%		2,519.36	1.89%	1.28%
64.	Oct 31, 2017	50.90	0.19	5.36%			2,575.26	2.17%
65.	Nov 30, 2017	49.06		-3.75%			2,647.58	2.73%
66.	Dec 31, 2017	47.28		-3.76%	-0.72%	1.75%	2,673.61	0.97%	1.96%	1.46%
67.	Jan 31, 2018	51.59	0.19	8.69%			2,823.81	5.32%
68.	Feb 28, 2018	50.67		-1.82%			2,713.83	-4.05%
69.	Mar 31, 2018	45.75		-10.75%	-1.29%		2,640.87	-2.76%	-0.50%
70.	Apr 30, 2018	45.67	0.19	0.24%			2,648.05	0.27%
71.	May 31, 2018	46.72		2.25%			2,705.27	2.12%