Oracle: Better To Wait And Watch

It is interesting to watch the Oracle (ORCL) stock. As the company was getting closer to the start of the eight-week trial with Goggle over Java intrusion issues (that we will discuss here), analysts appeared to be moving to the sidelines to play a "wait-and-see" game. Within the last eight weeks, before the start of the trial:

• Zack's Investment Research reiterated a "neutral" rating on shares of Oracle
• Research analysts at JMP Securities from an "outperform" rating to a "market perform" rating
• Analysts at Caris & Co. downgraded shares of Oracle from a "buy" rating to an "average" rating
• Analysts at Macquarie downgraded shares of Oracle from an "outperform" rating to a "neutral" rating

And the stock moved sideways, peaking at $30.5 through much of March before it started slowly down. With not much movement, it is trading about $29.31.

For the next eight weeks, I am afraid the world is going to take a neutral position on the stock while the trial goes one. On the second day of the trial, the chief executives of Silicon Valley giants Google Inc. (GOOG) and Oracle Corp. took the witness stand in this battle over technology patents and copyrights.

This 8 week battle is over "application programming interfaces" ((API)). Oracle claims Google stole 'intellectual' property in Java to make Android software. Google claims the technology in question is not covered under copyright. Java is free and open to all for use, the disagreement is whether the APIs are.

For Oracle, this could mean a $1 billion judgment if things go its way. But at the same time, it may also open up a can of worms for the programming world as a whole. Simon Wardley, a researcher at at Computer Sciences Corp. (CSC) believes finding that API's are copyrightable would be "fairly catastrophic" for the U.S. software industry. Functions that programmers use would become protected, leading to more lawsuits.

Regardless of the outcome, it looks like everyone is sitting on the sidelines waiting to see what will happen in the next two months. It is a good place to be. Do not put your money into Oracle just yet.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.