Oracle Warns of a Miss

Mar 01 2001

Database giant Oracle warned Thursday that it would miss expectations for its third quarter, raising fears that this bellwether's malaise would spread to other software makers.

Oracle said that for the quarter ended Feb. 28, revenue would rise about 9 percent, significantly below the 15 percent to 17 percent growth Wall Street had expected. The company projected that earnings would come in at 10 cents a share, when analysts had anticipated 12 cents.

While the shortfall is modest compared with those recently revealed by technology companies in the chip and hardware businesses, it nevertheless signals that the software industry will have increasing exposure to the broader economic slowdown.

"The problem is the U.S. economy," Oracle CEO Larry Ellison said in a statement. "A substantial number of our customers decided to delay their [information technology] spending based on the economic slowdown in the United States."

Oracle CFO Jeffrey Henley added, "We can't predict when sales growth will improve."

Analysts say ambitious growth targets have made the current quarter a challenging one for Oracle, which said that key database sales were flat to slightly down but that sales of applications software had grown 50 percent. In after-hours trading, Oracle shares plunged 17 percent to $17.69, setting a negative tone for Friday's Nasdaq trading.

Still, it was "not that big a miss," says WIT Soundview analyst James Mendelson.

Oracle's uncertainty about the future, however, should ring alarm bells at other software makers hoping to finish the final months of the March quarters on high notes.