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Earnings Preview: Oracle to post 2Q amid Sun deal

Oracle Corp. is scheduled to report its fiscal second-quarter results after the market closes Thursday. Below is a summary of key developments and analyst commentary about the period.
/ Source: The Associated Press

Oracle Corp. is scheduled to report its fiscal second-quarter results after the market closes Thursday. Below is a summary of key developments and analyst commentary about the period.

OVERVIEW: Oracle's biggest immediate challenge is convincing European Union regulators to approve its $7.4 billion acquisition of Sun Microsystems Inc., a deal that appears to be getting closer to receiving the final antitrust clearance it needs to go forward.

The deal has already been approved by the U.S. Department of Justice, and on Monday Oracle pledged to support Sun's database technologies in 10 key areas that European regulators are worried about.

Oracle promised to outspend Sun on developing Sun's MySQL database, which is popular among Web sites such as Google and Wikipedia and competes with Oracle's database products. Oracle also vowed to continue releasing improvements to MySQL under an "open-source" software license, which means the programming code will be freely available on the Internet.

Oracle and the European Commission both described the discussions as "constructive," and the Commission said Oracle's promises are an "important new element" that will be considered in its review. The development has raised investors' hopes that the deal won't be scuttled or broken up in any way to gain approval with regulators.

European regulators have a Jan. 27 deadline to make a decision on the deal.

The deal is important to Oracle because it represents Oracle's foray into making computer hardware and gives the company more control over the development of the Java programming language that Sun invented. Java is a core ingredient of many of Oracle's products and the Internet in general, and is a reason IBM Corp. was also bidding on Sun before being trumped by Oracle's offer of $9.50 per share.

Sun's shares have traded below that offer price on fears the deal won't go through.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Oracle to earn 36 cents per share, excluding one-time items, on $5.7 billion in revenue in the November quarter. In the same quarter last year, Oracle earned 34 cents per share excluding items, on $5.6 billion in revenue.

ANALYST OPINION: Yun Kim, an analyst with Broadpoint.AmTech, wrote in a note to clients that Oracle's database business should rebound from its "weak performance" in the previous quarter, while the applications business should remain "steady but lackluster."

Kim said technology companies are showing a "meaningful increase" in business that will benefit Oracle, because of the expected pickup in new projects in 2010 that will require companies to buy databases.

"In the current environment, Oracle is considered one of the safest names in technology and will likely be considered one of the names to own when the tech sector rallies," Kim wrote.

STOCK PERFORMANCE: Oracle's finished the quarter up 1 percent to end November at $22.08.