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

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
wrestling.

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
own.

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.