Oracle Corp. (NASDAQ:ORCL) is due to report tonight after the close. Consensus calls for $0.23 in earnings per share for the quarter ending Feb 28. Oracle has a unique fiscal year ending May 31. With that, Oracle sees momentum building for both the February and May quarters, and then tails off significantly for the August quarter.

Oracle is the worldwide leader in database software technology. It has a market share well north of 50%, and so far, the Oracle pricing structure has held up. It has near-obscene operating margins of 50%+ on the database business. While the database business has been the bread and butter for Oracle, the company has struggled with its applications software offerings.

Oracle has had a history of spotty, at best, research and development efforts for its applications business. The result has been Oracle's acquisitions of PeopleSoft and Seibel Systems with the idea being "if you cannot build it, buy it." Its acquired companies have been absorbed successfully and have provided the elusive growth Oracle has been lacking as the core database market has been growing under 10% per year.

On March 1, Oracle has announced its intentions to acquire Hyperion Solutions Corp. (NASDAQ:HYSL). Hyperion fills another research and development gap that Oracle has struggled with: business analytics. Business analytics should be a complimentary sale with database software.

Oracle will achieve its guided $0.23 per share tonight. Oracle would not announce a major acquisition like Hyperion, then have the audacity to blow the quarter.

Georges Yared is the author of Stop Losing Money Today and Baby Boomer Investing. Please visit www.georgesyared.com

When business applications software maker Oracle Corp. (NASDAQ:ORCL) announced last week its intention to purchase rival Hyperion Solutions (NASDAQ:HYSL), Oracle not only made a move to improve its position to challenge sector leader SAP (NYSE:SAP), it also continued its well-established strategy of expansion through acquisition.

Germany-based SAP did show weakness in its Q4 report back in January, and more recently has denied rumors that its founders are looking to sell their stake in SAP.

But the Oracle-Hyperion deal has prompted speculation about other mergers and acquisitions that may follow in its wake. These and other reservations about the deal were explored recently by Blogging Stocks contributors Georges Yared and Tom Taulli.

The question is, how will all this shake out when Oracle reports its Q3 earnings on March 20? According to Thomson Financial, the consensus revenue estimate is $4.3 billion, with earnings per share of 23 cents, as compared to actual $4.1 billion and EPS of 22 cents last quarter. The consensus rates ORCL a buy, with 12 strong buy recommendations, 10 buy, and 12 holds, from those analysts' surveyed. The price target is $19.59; ORCL opened Wednesday at $16.77. The 52-week high was $19.75 in late November, and the 52-week low of $12.72 about a year ago.

Can Oracle beat analysts' expectations, perhaps signaling a serious run at SAP, or will complications from its acquisitions strategy and other market factors cause it to fall short? How do things in the crystal ball look to you?

As I mentioned yesterday in BloggingStocks.com, Oracle's (NASDAQ: ORCL) $3.3 billion deal for Hyperion Solutions (NASDAQ: HYSL) is at a reasonable valuation. It also is a way for Oracle to slap SAP (NYSE: SAP).

But are there problems with the deal?

Hyperion's focus is on performance management. This helps companies manage, monitor and analyze performance across all business segments, such as marketing, HR, finance and so on. Such things are important in light of the heavy compliance requirements of corporate America. It also helps companies deal with competitors.

In fact, IDC projects growth in this market at about 12-14% per year.

Well, I had a chance to interview Ben Plummer, who is the vice president of worldwide marketing of Applix (NASDAQ: APLX). His company is also a provider of performance management software.

His take: "We are not surprised by this acquisition. While it validates a change in the market, we also know that the software buyers are very savvy about the business analytics market, and are not impressed with having a one-stop shop for all their enterprise solutions: they see the effects of a vendor acquiring just parts of the puzzle. And many prefer the best-of-breed, pure play providers who have grown up in this space."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

MOST NOTEWORTHY: Today's more notable downgrades included Dell Inc (DELL), Deutsche Telekom ADS (DT) and the Nasdaq Stock Market Inc (NDAQ):

• Needham downgraded Dell inc (NASDAQ: DELL) to Hold from Buy after the Q4 results as they now believe the company is unlikely to outperform for "at least" several quarters. They considered Dell's notebook shipments to be the biggest disappointment in the quarter.

• Deutsche Telecom ADS (NYSE: DT) was cut to Sell from Neutral at Merrill Lynch.

• JP Morgan downgraded the Nasdaq Stock Market Inc (NASDAQ: NDAQ) to Neutral from Overweight following the company's price cuts as they feel the new prices negatively impact the U.S. cash equity business.

OTHER DOWNGRADES:

• Baird cut Xerium Technologies Inc (NYSE: XRM) to Underperform from Neutral, citing increased spending plans and pressure from the underlying paper market that raised dividend sustainability concerns.

• First Albany downgraded Hyperion Solutions Corp (NASDAQ: HYSL) to Neutral from Buy.
  

• Sanders Morris cut Crosstex Energy (NASDAQ: XTEX) to Hold from Buy. Raymond James downgraded shares of Crosstex to Market Perform from Outpeform.

• Bernstein downgraded TXU Corp (NYSE: TXU) to Market Perform from Outperform as the firm believe the current bid from Kohlberg Kravis Roberts and Texas Pacific Group will succeed.

• Merrill Lynch cut Altera Corp (NASDAQ: ALTR) to Neutral from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

As Tom Taulli wrote earlier, Oracle Corp. (NASDAQ:ORCL) announced its intention to buy Hyperion Solutions Corp. (NASDAQ:HYSL) for $3.3 billion this morning. This will of course trigger speculation that the other two key players in the business intelligence space will go the same route. The players are French-based Business Objects (NASDAQ:BOBJ) and Canada-based Cognos Inc. (NASDAQ:COGN). The bottom line is that all three companies have been in play and facing buy-out rumors for the last three years. The only problem was they could not capture an enhanced valuation until they demonstrated real growth -- top and bottom line.

But what does this signal for Oracle? Oracle is the undisputed worldwide leader in database products. All competitors in the database field are dwarfed by Oracle. The operating margins for Oracle in pure database sales is north of 40%.

However, two problems have emerged for the company these past 4-5 years: 1) Its internally developed applications software has been a disaster, forcing Oracle to purchase Seibel Systems and PeopleSoft. 2) Database margins are being scrutinized by the customer base.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) reported that Oracle Corporation (NASDAQ: ORCL) has agreed to acquire Hyperion Solutions Corporation (NASDAQ: HYSL) for $52 per share.
• The Wall Street Journal reported, citing people familiar with the matter, that Blockbuster Inc (NYSE: BBI) is in advanced talks to acquire Movielink LLC, an online movie-downloading company owned by major Hollywood studios.
• Also reported in the Wall Street Journal, McDonald's Corporation (NYSE: MCD) is moving closer to adding lattes and cappuccinos to its menu, a move that would be a direct shot at Starbucks Corporation (NASDAQ: SBUX).
• According to the Financial Times (subscription required), DirecTV Group Inc (NYSE: DTV) is considering ways to bundle high speed internet access to its 15 million satellite television customers.
• The Financial Times reported that private equity is "hovering" over Home Depot Inc's (NYSE: HD) wholesale supply business, which could fetch $11B in a sale.

OTHER PAPERS:

• The Detroit News reported that Ford Motor Company (NYSE: F) won a court order forcing diesel engine supplier Navistar to resume shipments to Ford's Louisville plant.
• Investor's Business Daily's "New America" column highlighted bank and broker SWS Group (NYSE: SWS).

Companies are always looking for an edge and they can usually find one by comparing the success rates of their various endeavors. Today's featured firm is an established provider of the business intelligence programs and development tools firms use to refine their focus.

Hyperion Solutions Corporation (NASDAQ:HYSL) provides business performance management software. Its program systems enable customers to collect, organize and analyze enterprise data in search of such useful indicators as sales trends, buying habits and budget swings. The results are used to understand customer relationships, create statutory reports, develop strategic plans and monitor performance against goals.

The firm pleased investors last week, when it reported fiscal Q2 EPS of 50 cents and revenues of $222.9 million. Analysts had been looking for 43 cents and $212 million. Management also guided Q3 EPS to 40-45 cents (42 cent consensus), Q3 revenues to $215-$220 million ($208.83M consensus), FY07 EPS to $1.80-$1.85 ($1.72 consensus) and FY07 revenues to $885-$895 million ($856.45M consensus). Shares popped through 30-day, 50-day and 90-day moving average resistance on the news and are now consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys," six "buys," fourteen "holds" and three "sells." The HYSL Price to Sales ratio (2.88), Price to Book ratio (3.75), Price to Free Cash Flow ratio (15.05), Sales Growth rate (20.16%) and EPS Growth rate (35.14%) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 600 SmallCap Index. Institutional investors hold about 95% of the outstanding shares. Over the past fifty-two weeks, HYSL has traded between $26.65 and $41.95. A stop-loss of $35.80 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.