Wall Street Beat: Antitrust, M&A issues move market

IT investors and corporate buyers who are wondering what effect consolidation will have on the software market had news to chew on this week: a positive Oracle financial report and Sun Microsystems’s purchase of SeeBeyond Technology. Meanwhile, Advanced Micro Devices’s lawsuit against Intel roiled the processor sector while Google shares broke the US$300 barrier.

Fueled by its purchase of PeopleSoft, Oracle income for the quarter ending May 31 came in better than expected on Wednesday. Excluding one-time charges and other items, earnings per share rose 36 percent to $0.26 per share, beating the consensus estimate of $0.23 per share by analysts polled by Thomson First Call. Oracle was also upbeat about the rest of the year, saying it expects 2006 annual earnings to be between $0.78 and $0.81 per share, above the mean analyst estimate of $0.78 per share.

The stronger-than-expected result and solid guidance should give credibility to Oracle’s takeover strategy. Oracle bought PeopleSoft in December for $10.3 billion after an 18-month takeover battle that began with a hostile bid, which left industry observers to question whether Oracle was alienating users. PeopleSoft itself had acquired J.D. Edwards prior to being acquired by Oracle.

The Oracle earnings spurred trading that pumped up the company’s shares (ORCL), which rose $0.74 on Wednesday to close at $13.57. There were, however, some doubts about what the earnings report means for the long haul. Several analysts pointed out that most of the $0.03 difference between the forecast and the results was due to an unusually low tax rate and the effect of foreign exchange rates.

Meanwhile, traders gave the thumbs-up to Sun’s Tuesday announcement that it would acquire SeeBeyond for $387 million in cash to strengthen its business intelligence software offerings. SeeBeyond (SBYN) shares jumped $1.01 to close at $4.29 while Sun (SUNW) shares rose $0.05 to close at $3.74. Sun has plenty of cash in the bank, partly as a result of its 2004 deal with Microsoft to settle patent and antitrust litigation, and executives hinted that more acquisitions in the business intelligence arena might occur.

It was Intel’s turn Tuesday to become the subject of an antitrust suit. AMD made public its lawsuit against the processor giant, charging Intel with unfair business practices. The wide-ranging suit accuses Intel of using illegal subsidies to woo manufacturers, and using its dominance in the chip market to threaten companies with “severe consequences” for using AMD products. The subsidies involve marketing dollars given to PC makers, but it may be tough to prove that the money constitutes illegal subsidies that restrict competition, analysts said. Many analysts said it was too early to lay odds on the chances for the lawsuit succeeding. It’s expected to go to court by the end of next year.

Traders did not seem bothered by the news, though. The price of Intel (INTC) shares rose by $0.47, to close at $26.33 Tuesday. The rise was attributed to a general lift in stock prices as oil prices eased. Shares of AMD (AMD) moved up $1.03 to $17.70 Tuesday.

One of the most watched stocks on the market, Google (GOOG), broke the $300 barrier Monday, hitting $304.10, after it announced a video-viewing channel for its site. Earlier this month, the company became the most highly valued media and online company in the world, beating Time Warner. Some analysts are beginning to worry that Google stock is overvalued, though most investment advisors polled by Thomson First Call are still calling for a buy of the stock, and some are saying it could go as high as $350 per share.