Friday, November 19, 2004

Why I sold Oracle

On May 28, 2003 I sold Oracle at $13.35 a share. It was, oddly enough, the day my son, Joshua, was born. If you're imagining me on the phone with my broker while my wife struggled to give birth to my firstborn, stop that! For one thing, it isn't nice to imagine such a private moment, and for another I initiated the trade days before. Mainly I sold because I had to. That is, my brokerage charges a fee if I don't make at least one trade in 12 months. Also, Oracle was somewhat expensive in my opinion, though not so much that sold all of my shares.

Shortly after I sold, Oracle began it's hostile takeover bid for PeopleSoft. This was not a huge surprise for people who had listened to Larry Ellison, since he'd been suggesting that the enterprise software business had matured. Lots of analysts criticized the offer, since Oracle's price and revenue dropped off a bit. But as a long-term shareholder, I was pleased. PeopleSoft's operations could be minimized so that most of it's revenue ends up as profit for Oracle if the deal goes through.

As time goes on, I think Oracle (and other business software makers) will become more like cyclical stocks than growth stocks. As the economy picks up, companies will buy more licenses and when there is a recession, companies will cut spending on infrastructure. If that happens, I plan to look around for other places to invest.

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