by Jameson Berkow in The Financial Post

Strong results from business software maker Oracle Corp. on Tuesday evening has RBC Capital Markets expressing high hopes for Canada’s largest software company’s next quarter.

Mike Abramsky, managing director of global technology equity research for RBC, shared some optimism for Open Text Corp. with his clients in a note on Wednesday, about one month before the Waterloo, Ont.-based company reports first quarter earnings for its 2012 fiscal year. Redwood City, Calif.-based Oracle reported US$8.37-billion in revenue and earnings per share of US$0.48 after markets closed Tuesday, beating Wall Street expectations of US$8.35-billion in revenue and US$0.46 in EPS.

Particularly interesting to Valuentum Securities was Oracle’s 60% growth in software applications revenue in Europe. Contradicting reports of a corporate crisis in Europe, according to the Illinois-based stock analysis firm, Mr. Abramsky believes Open Text can look forward to a similar European earnings bump.

“Like Oracle, Open Text has high exposure to Europe (~40%), but our checks (so far) indicate that its business there remains resilient, so it is possible Open Text could see similarly healthy license growth this quarter,” Mr. Abramsky said.

Shares of Open Text, which is second only to International Business Machines (IBM) Corp. in the worldwide enterprise content management (ECM) sector, plunged as much as 16% on the Toronto Stock Exchange the day after the company missed analyst expectations for profitwhen it reported Q4 earnings after markets closed on August 10. As of 10:15 a.m. ET Wednesday morning, the stock remains about 5.6% below its August 10 closing price of $57.76 per share.

Nonetheless, analysts remain largely bullish on Canada’s software champion because of its growth by acquisition strategy and its potential as a takeover target. The company purchased several smaller software firms in recent months, including two major U.S.-based firms for a combined US$440-million, to expand its mobile and business process management (BPM) offerings.

Less than 10% of Open Text’s sales are to government agencies, which Mr. Abramsky said represents a potential risk given widespread public sector budget cuts ongoing throughout the world. However, RBC does not consider that a cause for Open Text shareholders to be concerned.

“The public sector is showing resiliency in spending on Open Text’s high [return on investment] software,” Mr. Abramsky said.

“They are now more than ever ‘spending to save’.”

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