Oracle Meets Lowered Estimates and May Have
Seen the Worst, CFO Says
By Joe Bousquin
Senior Writer
6/18/01 5:43 PM ET
"worse may be behind it, according to Oracle CFO Jeff Henley"
After squeaking by on its earnings and falling below expectations on revenue for its
fiscal fourth quarter, Oracle (ORCL:Nasdaq - news - commentary) now thinks the
worse may be behind it, according to Oracle CFO Jeff Henley.
"We think we've hit the bottom in Q4. It feels like things are picking up a little bit,"
said Henley in an interview with TheStreet.com. "If we're right, than I think we
would see a gradual improvement in business conditions, and then by the end of
the calendar year, things getting back to normal."
For the company's fiscal fourth quarter, Henley said Oracle should earn 8 cents
per share, in line with analyst expectations. He also said analysts' estimates for
earnings of 50 cents per share during fiscal 2002 were "reasonable."
"We would say there's maybe a little more upside than downside this time," Henley
said. "And hopefully, this will be a little bit conservative."
Earlier Monday, the world's second-largest software maker said today it earned 15
cents per share for its fiscal fourth quarter, ended May 31, on revenue of $3.26
billion.
That earnings number is a penny better than analysts' expectations of 14 cents per
share, but is in line with what Wall Street was expecting before many analysts cut
their estimates during the quarter. Analysts also were expecting the company to
have revenue of $3.36 billion, according to Multex.com. The results are flat to
down compared with one year ago, when the company earned 15 cents per share
on revenue of $3.37 billion. The company's net income was $855 million,
compared to $925.9 million a year ago.
Wall Street's downwardly adjusted numbers are a result of worries the company
would issue a profit warning, as it did at the end of its third quarter, but that
warning never came.
The company reported software license sales of $1.66 billion, and services
revenue of $1.61 billion.
During the regular trading session, Oracle shares closed down 16 cents, or 1.1%,
at $14.84. But after hours, they rose to $15.78 on Island ECN.
Oracle's results were largely expected by Wall Street. As has been the case with
almost all companies over the past six months, it's the guidance that matters, and
Henley's prognostication Monday afternoon was likely helping the stock.
The CFO said the company was able to make its earnings numbers by employing
vigilant cost controls using its own software, something it's been touting for nearly
two years. But critics have opined that the company has also likely employed
significant staff-reduction measures to make its numbers. Monday, Henley said
that's not the case.
"Our worldwide headcount declined 1% sequentially in the quarter," Henley said.
The company had indicated it would make staff cuts of 1% to 2%, far smaller than
the 10% and 20% cuts at other large tech companies. "We've been running pretty
efficiently and lean, so we haven't felt the need to do the massive headcount
reductions."
Currently, analysts expect the company to earn 8 cents per share on revenue of
$2.39 billion for its 2002 fiscal first quarter, which started at the beginning of June,
and 50 cents, with sales of $12.43 billion for fiscal 2002, which ends next May,
according to Thomson Financial/First Call.
Analysts have warned in recent weeks, though, that their estimates on Oracle may
be coming down further, pending what the company says about its results and
outlook on its conference call. One area of awful results: the 24% decline, year
over year, in the company's software applications business, something Henley
described as "not good."
Oracle has been pushing into the lucrative market for sophisticated business
software applications in recent years. But analysts say that push could potentially
hurt its relationship with other software companies like PeopleSoft and SAP, which
build their software to run on top of Oracle's core databases.
The company's numbers are critical, not only for itself, but the rest of software. For
Oracle, the results represent the fruit of its fiscal fourth quarter, which accounts for
up to a third of the firm's annual sales. For investors in other software stocks,
Oracle's results offer a glimpse of what's to come, because the firm reports its
numbers a month earlier than most other software shops.
On March 1, a day after the end of its fiscal third quarter, Oracle warned that it
would not meet analysts' estimates for the period, a move that shocked Wall Street
and put a chill over the rest of software. But software stocks soon shook off
Oracle's cold, and in April and May saw healthy gains. Some of those gains have
now been placed in jeopardy, though, as Wall Street worried that Oracle might
disappoint all over again. Just think of it as software's own sick version of the
vicious cycle.
But Oracle's results also come at a time when the company is facing increased
competition from foes Microsoft (MSFT:Nasdaq - news - commentary) and IBM
(IBM:Nasdaq - news - commentary). While Oracle still controls more than a third of
the database market, those two firms have been making gains on the leader,
using their lower prices as an incredibly effective weapon during tight spending
times.
In response, Oracle last week lowered the costs of its own database software, as
it unveiled the next version of that core product, called Oracle9i. Oracle executives
have quietly been saying that the new software, which allows companies to run a
single software program over multiple machines, will help the company regain its
footing in the market. |
