Oracle's Remarks Give Nasdaq a Last-Minute Lift
By Ronna Abramson
Staff Reporter
TheStreet.com
06/05/2002 06:07 PM EDT
Oracle (ORCL:Nasdaq - news - commentary - research - analysis) CEO Larry Ellison said the world's second-largest software maker has "at least" met Wall Street consensus earnings estimates for the fourth quarter. But at 12 cents, it means the company's earnings may fall short of its guidance provided in March.
Shares of Oracle bounced up to close 10.7% higher at $8.66. It also appeared to give the Nasdaq a boost at the tail end of trading. The Comp rose about 20 points in the final half-hour of trading after Ellison's remarks.
"Had we not done at least 12 cents in operating income, we would have had to warn, and we didn't warn," Ellison said at a news conference at the company's Redwood Shores, Calif., headquarters. Ellison declined to provide more specifics, citing Oracle's quiet period.
The 12-cent consensus estimate, as gathered by Thomson Financial/First Call however, is lower than the company's guidance. In March, Oracle CFO Jeff Henley said the company expects fourth-quarter earnings to range from 13 cents to 14 cents a share -- down 1 to 2 cents a share from a year ago.
Wall Street had been bracing for Oracle to warn that it would miss numbers for the fourth quarter, which ended May 31. But both Monday and Tuesday passed without any preannouncement from the company, which in the past has warned on the first business day after its quarter ended.
In contrast, both Tibco Software (TIBX:Nasdaq - news - commentary - research - analysis) and Manugistics (MANU:Nasdaq - news - commentary - research - analysis) -- the other two major software vendors whose quarters end in May, one month earlier than the rest of the sector -- preannounced disappointing numbers Tuesday.
Oracle, however, still could miss revenue estimates. Analysts have speculated that Oracle would be unlikely to warn if it made earnings estimates yet still missed on revenue. The consensus estimate is for Oracle to report $2.59 billion in fourth-quarter revenue.
While Oracle's fourth quarter is typically its biggest of the year, that still represents a 16% jump from the third quarter, which may be a tough hurdle to cross. In the fourth quarter last year, Oracle reported net income of 15 cents a share on $3.26 billion in revenue.
"The big question is what happened with their license revenue and how did they get to that 12-cent figure," said Pat Walravens, an analyst at Jolson Merchant Partners. "If it's through cost-cutting, the market won't react well to it, in my opinion." Walravens has a hold rating on Oracle and his firm hasn't done any banking with the company.
Brent Thill, an analyst at Credit Suisse First Boston, agreed there's "legitimate risk" that Oracle shares could drop again if the company's revenue numbers fall short when it reports its financial results June 18. Larger software companies like Oracle, PeopleSoft (PSFT:Nasdaq - news - commentary - research - analysis), SAP (SAP:NYSE - news - commentary - research - analysis) and to some degree Siebel Systems (SEBL:Nasdaq - news - commentary - research - analysis) have large enough infrastructures that they can better control costs than a smaller company such as Manugistics or E.piphany (EPNY:Nasdaq - news - commentary - research - analysis). "These [larger] companies have a lot of different throttles and levers they can pull," Thill said. "We think there's a higher likelihood those companies will be able to achieve their earnings."
In the last quarter, punctuated by a series of misses, PeopleSoft and Siebel met earnings numbers but fell short on license revenue, while smaller companies were more likely to miss on both fronts. The current quarter could potentially be a repeat of that pattern, said Thill, who has a buy rating on Oracle. His firm hasn't done any banking with the company.
"I still think we're in an extremely difficult environment," Thill added. But "I think a lot of the stocks have already embedded that" in their price.
Walravens, however, has offered some modest signs of hope that the environment is getting ever so slightly less difficult. In a survey of 31 large companies released by Walravens on Tuesday, 54% of respondents said spending for the second half of the year would be flat. That's hardly great news, but it's a "huge improvement" from the results of a similar survey conducted in January, Walravens said. At that time, 48% of those surveyed said spending in 2002 would be down compared with 2001.
"Relatively speaking, we're seeing improvement and hopefully we start to see that showing up in the results of some of the software companies," Walravens said. |
