ORCL - Craig-Hallum downgrades Rimini Street on unfavorable court ruling in Oracle case

2023-07-27 14:51:07 ET

Enterprise software provider Rimini Street ( NASDAQ: RMNI ) was downgraded to "Hold" from an investment rating of "Buy" by analysts at Craig-Hallum, citing the latest court ruling related to a case with Oracle ( NYSE: ORCL ) as "stunningly harsh" against the company.

The research and rating agency also slashed its price target widely, to $3 from $10.

Late on Tuesday, Oracle issued a press release stating that the United States District Court for the District of Nevada had determined that Rimini Street had "repeatedly and illegally infringed" its copyrights and had improperly deleted copyright notices.

The court alleged that Rimini Street had made at least 15 misleading statements about its support operations. A permanent order was also issued to immediately and permanently stop the company from using some support services while further restricting the use of others.

"This new ruling places restrictions that so severely tie RMNI’s hands as to make it uneconomical for them, in some cases, to actually provide those services (specifically the 10% of revenue that is PeopleSoft related), raising obvious questions as to the meaning/relevance of the Supreme Court ruling in the first place," analyst Jeff Van Rhee wrote in a July 27 report.

Rhee expects that there will likely be some churn as a result of the court decision, putting Rimini on a defensive stance to retain existing clientele.

Craig-Hallum revised its model on Rimini Street to reflect the impact of losing about 10% of revenue and a 300-bps hit to its gross margin, but added that the balance sheet is "in good shape".

Shares of the company fell as much as 12.3% to a session low of $2.45 on Thursday. Stock is down 32% so far this year as of Wednesday’s close.

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