Oracle results to shed light on post-Sept. 11 business

CIOL Bureau
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Lisa Baertlein


PALO ALTO: Technology investors on Thursday said will train a keen eye on

results from software giant Oracle Corp., which will be among the first in its

sector to shed light on post-Sept. 11 business and give an outlook for 2002.

Shares of Redwood Shores, California-based Oracle lost more than five percent

of their value after company co-founder and Chief Executive Larry Ellison warned

on Nov. 12 that the world's biggest database software vendor would miss its

previous revenue and earnings projections for its fiscal second quarter ended

Nov. 30.

Nevertheless, software stocks have made healthy gains since Sept. 17, when

stock markets reopened after being shuttered for six days in the wake of the

deadly air attacks on the Pentagon and World Trade Center.


Standard & Poor's computer software index is up more than 16 per cent

since the market reopened and Oracle -- which finished Monday's regular Nasdaq

session 49 cents lower at $15.42 -- is up about 40 per cent. "Right now

it's a very forgiving and very hopeful mood surrounding these stocks," said

Robertson Stephens analyst Eric Upin, who noted that investor activity points to

expectations for a strong recovery in the second half of next year.

Just last week, Ellison's comment that business had stabilized and possibly

improved a bit helped to send Oracle stock, and the broader technology market,

higher. Like many other technology stocks, however, Oracle shares remain

significantly off their year-high of $35.


Oracle issues

In issuing last month's warning, Ellison said Oracle likely would have per-share
earnings of 9 cents to 10 cents on revenue that falls short of the company's

earlier forecasts. Oracle executives had previously said they expected lower

year-over-year revenue and earnings that matched last year's 11 cents.

"This is a deterioration," said Upin, who added that investor

sentiment has yet to catch up with economic reality and noted that Oracle shares

are trading at multiples similar to those seen when the company was enjoying

robust growth.

"Our concern is that we have stocks trading at yesterday's multiples ...

Now we're in an environment where we're hoping that companies will make their

numbers," he said. But the economy is not the only issue Oracle is



Its bread-and-butter database software business is maturing at the same time

that technology giants International Business Machines and Microsoft are making

strong marketing and product pushes into the space. Elsewhere, uptake of

Oracle's business automation software has been slower than expected. The company

has made a big push into the application server market, but it is the new kid on

a block dominated by BEA Systems and IBM.

On a positive note, going forward, Oracle likely will have an easier time

clearing the hurdle of year-ago results because its business began to soften in

the fiscal third quarter of last year.


The spending question

"2001 will be remembered as the year that the rest of the hot air that led
to the creation of the Internet bubble slowly leaked out until it ended with a

sickening crash on Sept. 11," Merrill Lynch software analyst Chris Shilakes

wrote in a client note on Monday.

While big software vendors such as Oracle, PeopleSoft, Veritas, Siebel

Systems and Computer Associates are not immune to negative economic influences,

they do have the healthy balance sheets needed to weather the storm and come out

the other side even stronger, Shilakes said.

To that end, the big question hanging over the technology market is when

corporate spending will again tick up. "It's still a phenomenally tight

market for spending. IT departments are ... lucky if their budgets are going to

be increased at the rate of inflation," said Evan Quinn, chief analyst at

the Hurwitz Group, a technology research shop.


Analysts also wonder whether companies that gorged themselves on software

amid Y2K preparations and the Internet boom will find that their appetite for

the products is as hearty as in recent years.

Looking ahead, Quinn said Oracle's new application server -- software that's

used by developers as a foundation for their programs -- should play an

important role as corporations try to get more out of the software they already


The new offering also should play into Oracle's goal of having large

companies automate their entire business with Oracle products, Quinn noted.

(C) Reuters Limited.