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Technology Stocks : Oracle Corporation (ORCL) -- Ignore unavailable to you. Want to Upgrade?

To: Larry Myers who wrote (4470)	12/13/1997 10:31:00 PM
From: blankmind	Respond to of 19080

The other reason Oracle tanked Analysts say the year 2000 computer bug will sting Oracle - and enterprise software companies in general - in the next several months by Michael Brush Tuesday, December 9, 1997 7:30 p.m. EST When Oracle (NASDAQ: ORCL) lost about a third of its value Tuesday after announcing weaker than expected results for the quarter, most pundits were citing weak demand from Asia and U.S. telecom companies at the main culprits. True, these factors -- and a sales staff reorganization -- led to the carnage at Oracle, which cost CEO Larry Ellison over $2 billion today alone. But behind the scenes was a little-noticed trend that is likely to dog similar software companies starting in about six months. Call it the dark side of the otherwise upbeat "Year 2000" investment play, which until now focused on the rosy outlook for companies that re-program older computer systems to accept "2000" as a year. In fact, the "Y2K" phenomenon may soon start to hurt companies -- like Oracle -- that make so-called "enterprise resource" or "backbone" software. Those are fancy terms for company-wide client-server software that keeps track of everything from accounts payable to product distribution and human resources. Companies like PeopleSoft (NASDAQ: PSFT) and Oracle, which make this kind of software, have had a boom in the past several quarters. Firms using their products have rushed to buy upgrades earlier than they would have -- because those upgrades contain Year 2000 fixes. The much sought-after Y2K fix, in other words, pushed forward the product cycle for these companies in the past several quarters. What's more, many firms that use the older mainframe computer systems have been converting to these client-server based software systems without Year 2000 problems. The problem for the enterprise resource software writers like Oracle and PeopleSoft is that the party may now be ending, says Piper Jaffray analyst Arun Kumar. "By the beginning of 1998, most companies that have to make this purchase will have already done so. The wave should start trending down sharply in mid-1998 and beyond." This hangover effect will continue through 1999, Piper Jaffray analysts say. First victim: Baan (NASDAQ: BAANF), a leading European-based supplier of enterprise resource software that has expanded its reach by forging alliances with Deloitte & Touche, Ernst & Young and Andersen consulting companies. Because of the upcoming turnaround in the enterprise software market, Piper Jaffray analysts downgraded their recommendation on Baan from buy to neutral Tuesday. They don't think Baan will stop turning in good earnings surprises, as it has been for several quarters, but they are reducing the price earnings multiple they think is fair for the company. The trend could take more victims soon. To find out who may be next, round up the top producers of enterprise resource software. In addition to Oracle, Baan and PeopleSoft, investors should keep an eye on SAP a firm listed in European markets under the ticker SAPHY. Given the upcoming air pocket in the enterprise resource software market, you can expect more turbulence for all of these stocks in the future.