Be careful with ORCL...
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Tuesday March 13 4:02 PM ET
Oracle Outlook Dim As It Heads Into Key Quarter
By Lisa Baertlein
<<PALO ALTO, Calif. (Reuters) - While investors brace for disappointing fiscal third-quarter results from Oracle Corp. (NasdaqNM:ORCL - news) this week, the company, the world's second-biggest software vendor, faces a daunting challenge as it heads into what traditionally has been its most important quarter for sales.
``This is the most difficult time for a slowdown in demand for Oracle, given that the fourth quarter is always their strongest. The fiscal year rides on the May quarter,'' Merrill Lynch Analyst Chris Shilakes, told Reuters.
Analysts, on average, expect Oracle to pull in revenue of $3.8 billion during the fourth quarter, or nearly a third of total revenue forecast for fiscal 2001, according to First Call/Thomson Financial.
Someone wanting to know whether that number will stand, might want to look at Oracle's third-quarter results and forecast, slated for release on Thursday, as a harbinger.
Third-Quarter To Disappoint
One of Oracle's major vulnerabilities is its dependence on closing large, end-of-quarter transactions, Lehman Brothers analyst Neil Herman said in a recent research note.
That soft spot loomed large when the Redwood City, Calif., software maker said on March 1 that it would post third-quarter earnings of 10 cents per share, up 25 percent from a year ago, but 2 cents lower than analysts had anticipated.
Oracle executives said revenue growth in its mainstay database software business -- which accounted for more than one-third of its second-quarter revenues -- would be flat to slightly negative, versus analysts expectations for growth of 10 percent or more.
Oracle's fast-growing 11i e-business software suite revenue also will take a hit, coming in only 50 percent higher, compared with the company's earlier estimates for 75 percent growth.
Founder and Chief Executive Officer Larry Ellison blamed the miss on the reluctance on senior executives who are Oracle customers to give final spending approvals as Oracle pushed to close deals in the waning days of its third quarter.
Oracle executives also said they were not confident in their ability to forecast sales in the current weak economic environment.
Epoch Partners senior analyst Mark Verbeck said he will be looking to see if that statement still applies, and if the company has closed any of the sales is said were put on hold at the last minute.
``That will speak to the permanence of the situation: Is it a slowing or is it a hard stop and companies have walked away from the table? I'm expecting things have not changed,'' Verbeck said.
Analysts Say ``Show-Me''
Oracle was among the last of the Silicon Valley tech icons to succumb to economic pressures and when it did, it sparked a sell-off of PeopleSoft Inc. (NasdaqNM:PSFT - news), Siebel Systems Inc. (NasdaqNM:SEBL - news) and Veritas Software Corp. (NasdaqNM:VRTS - news), which are among the few remaining software companies that have not issued warnings.
``Oracle's results suggest that the pace of projects being undertaken and completed is indeed slowing in corporate America,'' Herman said.
``We believe that almost every stock is likely to be a 'show me' story for a long time to come,'' he said.
Herman lowered his fourth-quarter revenue estimate to $3.67 billion from $4.05 billion. The revised forecast includes year-over-year database growth of 3 percent, versus 21 percent previously, and applications revenue growth that was slashed to 30 percent from 60 percent.
Oracle shares were $1-7/16 higher at $16-5/8 in late trade on the Nasdaq, still off their year high of $46-7/16.
The stock has outperformed the Standard & Poor's computer software index by nearly 39 percent since the end of 1999, although both are currently down, with Oracle off about 41 percent and the index down 57 percent.>> |
