from Bloomberg;
Technology News
Thu, 18 Nov 1999, 6:01am EST
Oracle Shares Jump 10% on Forecast for Strong Fiscal Second-Quarter Sales
By David Ward
Oracle Rises on Forecast for Strong 2nd-Qtr Sales (Update3)
Redwood Shores, California, Nov. 17 (Bloomberg) -- Shares of
Oracle Corp., the world's largest database software company, rose
10 percent to a record after company executives said fiscal
second-quarter sales look strong.
Oracle rose 6 1/2 to in trading of 25.0 million shares,
making it the sixth-most active stock in U.S. markets. Earlier,
it touched 72 3/8. The stock has more than doubled this year. By
comparison, Oracle archrival Microsoft Corp., the No. 1 software
maker, has risen 23 percent this year.
Oracle has more prospective sales in the pipeline this
quarter than it did last quarter, Chief Executive Larry Ellison
and Chief Financial Officer Jeff Henley told analysts at a
briefing in Los Angeles. Concerns about the Year 2000 computer
glitch haven't slowed customers' software spending, they said.
''Senior management indicated that business trends for this
quarter are very healthy,'' Salomon Smith Barney analyst Neil
Herman wrote in a note to clients after the meeting. He has a
''buy'' rating on Oracle. ''This is in line with what we heard
from industry sources.''
Oracle executives also said they were on track to reduce the
company's costs by $1 billion by next June. Oracle says that by
using its own software, it can manage its sales force, inventory
and office management more efficiently.
''In selling, service, and (administrative costs), you will
see growth much slower than top-line growth,'' Ellison said in an
interview. ''We said we'd take a billion out of expenses, or more
accurately, 10 points of margin.''
E-Commerce for Itself
The company is on track to meet those goals, making its
sales force more efficient, reducing the cost to complete each
sale and increasing revenue, analysts said.
''As the company itself moves to a Web-based e-commerce
model, sales force productivity should shoot up, allowing the
company to drive revenue growth significantly faster than
employee growth,'' Salomon Smith Barney's Herman wrote.
Oracle likely won't increase the number of its employees by
next June and may, in fact, even end up with fewer employees by
next June, Ellison said, though he said the company has no plans
for widespread layoffs.
Having fewer employees ''would be a dream come true,''
Ellison said. ''It's not an insane notion, not totally out of the
question.''
Oracle's second quarter ends Nov. 30, and its shares have
risen 63 percent in the past month on optimism that revenue will
exceed forecasts. The Redwood Shores, California-based company is
expected to earn 22 cents a share, the average estimate of
analysts polled by First Call Corp.
Future Growth
''Pipeline growth this quarter is the strongest I've seen in
the past year,'' Henley said. ''This quarter is quite a bit
different than (last) quarter.''
Oracle in the past has boasted about its earnings prospects,
only to see its shares fall after missing the heightened
expectations. Ellison said in August that quarterly sales
''looked good,'' and Oracle's stock price rose, then fell, when
it missed the most optimistic so-called ''whisper'' estimates.
Concerns about the Year 2000 computer bug won't slow sales
this quarter, Oracle said. Some companies, including
International Business Machines Corp., have said their business
was being hurt by customers delaying computer purchases before
the date change.
''We're into the 11th month, and people are getting more and
more confident that (Y2K) isn't going to have an impact on
spending,'' Henley said. ''People are still buying software.''
Oracle is on track to reach its goal of reducing costs by $1
billion by the end of the company's fiscal year, executives said,
and that's reflected in growing profit margins.
''We've been growing earnings faster than revenue for some
time now,'' Henley said. ''That will continue.''
Oracle also is betting that revenue will rise as more
companies buy its software to begin doing business on the
Internet. Oracle and Ford Motor Co. earlier this month unveiled
an agreement to build a central Internet site where Ford and its
parts suppliers could post prices and see demand from the
automaker, matching suppliers with the automaker and saving both
Ford and its suppliers money.
Oracle will receive a commission for each sale and hopes to
announce other exchanges with large manufacturers in coming
months, Ellison said.
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