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

To: Carbonetic who wrote (10153)	3/19/1999 2:39:00 AM
From: Rusty Johnson	Read Replies (1) \| Respond to of 19079

For Oracle, March's Bust May Be Just a Bump Business Week Online Most analysts see long-term strength in a stock that has taken some recent lumps Investors in Oracle (ORCL) are still smarting from the software maker's Mar. 11 report of disappointing third-quarter revenues and the 22% one-day stock price decline that came next. Although Oracle's profits exceeded consensus analyst estimates -- it earned 20 cents a share for the quarter ended Feb. 28, vs. 19 cents predicted by analysts surveyed by First Call -- its product sales growth was far slower than expected. Fiscal third-quarter sales of its database and applications software rose only 7%, vs. the 20% the Street anticipated, says Brian Goodstadt, an analyst with Standard & Poor's equity research group. (Oracle's total revenues grew 19%, to $2.1 billion, thanks to its thriving services business.) Oracle shares closed on Mar. 18 at $29 11/16, down 28% from a high of $41 3/16 on Feb. 2. Still, Oracle's stunning rise in Business Week's performance rankings helps put the weak quarter into perspective. From a 1998 ranking of 102 among all the companies in the S&P 500, this year Oracle jumped to fourth place, behind only Microsoft (MSFT), Dell Computer (DELL), and Gap (GPS). Oracle earned an "A" for all but one of BW's eight performance grades, which include stock performance, sales growth, and profit growth. Only on its three-year stock return did it merit a "B." NOT "TERMINAL." Oracle is clearly a leading technology company with a key role in building the infrastructure for electronic commerce. The issue for investors is that its stock price seems to have gotten ahead of its sales growth. "This is what I would describe as an interruption in an otherwise steady recovery," says Bob Austrian, an analyst with NationsBanc Montgomery Securities, who lowered his rating from buy to hold on Mar. 12. Even so, he points out that despite the recent tumble, Oracle's stock has doubled in the past year. "This isn't a terminal ailment," he says. "Oracle is still one of the great companies in the space. But the near-term growth forecast really isn't quite as sexy as I'd hoped." Austrian was far from alone in tempering his expectations. Of the 28 analysts who cover Oracle, seven downgraded the stock on Mar. 12, according to First Call. But many analysts still recommend the stock long-term. "I'm positive on the long-term prospects for the company," says Goodstadt, who rates it a hold. "But there are several risks for the upcoming year." Those include a spending slowdown on information technology as companies defer buying new software and equipment until they have stabilized their systems for the Year 2000 bug. Moreover, Microsoft and International Business Machines (IBM) are proving serious competition to Oracle's database business. And, with a p-e on 1999 earnings of 34, the stock still isn't cheap. For its part, Oracle says its bet to Web-ize its entire product portfolio is just starting to pay off. The biggest piece of the puzzle was completed earlier this month when Oracle released Oracle 8i, a version of its primary database software that includes Internet support. The new product may have slowed sales for Oracle 8 since some customers could have been waiting to buy 8i. "Ten out of 10 major consumer Web sites run on Oracle," says Larry Ellison, Oracle's chairman and CEO -- including all of the major portals. "In the Internet where big is beautiful...that is something we can do that our competitors can't." BACK-OFFICE PUNCH. On the applications software side, Ellison highlights growth in Oracle's "customer relationship management" products, which will be upgraded next month. He also expects to grow faster than competitors SAP and PeopleSoft in sales of enterprise resource planning software -- products that enable companies to manage back-office processes. The only slow-growth area right now for Oracle is its consulting and education sector, a hiccup that company executives attribute to the overall slowdown in the enterprise application market. "We're extremely well-positioned and have incredible confidence in our product lineup," says Ellison. Oracle is so bullish on its growth prospects that for the first time in years, it will not reorganize itself to start the new fiscal year. Wall Street may have tempered its expectations for Oracle, but strong trading volumes show that many investors are using the dip as a buying opportunity. "There surely is an historic amount of disagreement on what to do with Oracle shares," says Austrian. The stock isn't due for a quick rebound, as Y2K concerns continue and the company will need another quarter to prove that its software sales are growing. But for investors willing to wait, Oracle's current share price could prove to be a bargain. By Amey Stone in New York and Michael Moeller in San Mateo, Calif.