Analysts: Sybase Stock Is Undervalued

FRAMINGHAM (05/05/2000) - Among database vendors, Sybase Inc. [Nasdaq:SYBS] is perceived to be a minor player. Compared with competitors such as Oracle Corp.

[Nasdaq:ORCL], IBM [NYSE:IBM], Microsoft Corp. [Nasdaq:MSFT] and Informix Corp.

[Nasdaq:IFMX], Sybase had the smallest share of new-license revenue last year, at 3.6%. In contrast, market leader Oracle's rate was 30.7%, according to Stamford, Connecticut-based Gartner Group Inc.

But analysts said market numbers don't tell the whole story for Sybase.

The company is profitable, has a loyal customer base and this month will announce offerings in the Internet portal and wireless computing arenas. The Emeryville, California-based company also promises high availability, good application integration and data management features for its Enterprise Portal Web-based server, for example. Thus, at about $22, the company's stock is undervalued, analysts said.

On April 18, Sybase announced very strong first-quarter earnings. Net income grew 129% to $6.7 million. Total revenue grew 9% to $227 million.

In its latest quarter, Oracle, which is trading in the high $70s, posted net income slightly more than double Sybase's. Oracle netted $763 million on revenue of $1 billion in its latest quarter, up 160% from the same period last year.

A Good Place

According to Gary Abbot, an analyst at Punk, Ziegel & Co. in New York, Sybase is in a very good strategic position against Oracle and IBM, largely because the company has had great success selling both applications and database engines into vertical markets - notably, Wall Street. Abbot said about 70% of Wall Street stock trades happen on Sybase software.

Sybase's closest competitor on Wall Street, he added, is the formidable IBM, which announced last month that it had stolen J.P. Morgan and Co. [NYSE:JPM] in New York and other unnamed customers.

However, "I don't see Sybase losing market share," Abbot said. "They have a stable customer base."

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