Oracle heads south

Oracle: Holding its own.

Shares of software-maker Oracle continued to tumble on Friday, a day after it said sales of its products were far weaker than expected.

Making its announcement after the markets closed on Thursday, Oracle said it earned a profit of $583m, or 10 cents a share, in its third quarter, just slightly higher than year-ago earnings of $503m, or 8 cents a share.

The company also expects problems later in the year.

While the disappointing earnings were not a surprise - since the company warned of them 2 weeks ago - Oracle stock still fell Friday to levels not seen since November 1999, trading at one point to $13.88, off 5.5% and achieving a new year low.

Reduced profits combined with foreboding over what the future holds for the No. 2 software maker, conspired to drag shares down.

Uncertain future

In making its announcement on Thursday, Oracle ominously omitted what it expects to earn in the coming months.

"The current economic uncertainty continues to limit our visibility going forward," said Chief Financial Officer Jeffrey Henley in announcing the company's earnings.

"If you asked me to guess right now, [total license revenue growth] would probably be zero, with flat earnings. No better. No worse, just holding our own," Mr Henley told Reuters news agency.

Analysts cut estimates

Following the news, analysts lined up to cut their estimates for what Oracle can expect to earn in the coming months and for the year.

Goldman Sachs said it expects Oracle to earn a profit of 45 cents a share for fiscal year 2001, down from its previous estimate of 47 cents a share.

At SG Cowen, analyst Andrew Brosseau cut his estimate of Oracle's profits in coming three months to 15 cents a share from 18 cents a share.

Still, that was better than Credit Suisse First Boston's reduction to 13 cents a share from 18 cents a share. Analyst Brent Thill also cut his rating on Oracle to "buy" from "strong buy".

Oracle chief speaks

In defending his company performance, Oracle Chief Executive Larry Ellison told the BBC's World Business Report that his company did "pretty well in a pretty tough economy."

"People are deferring buying decisions," Mr Ellison said. "In the face of that deferment... we still grew 25%. We still made $900m [pretax]."

Some analysts agreed with Mr Ellison's assessment. "Clearly, in this environment, customers are taking a hard look two or three times at the big-ticket items in their information-technology budget," said Merrill Lynch analyst Chris Shilakes.

"Applications still tend to carry a big ticket."

Looking to Europe

Other analysts noted, however, that the company's performance still was not up to snuff.

"Given that we were looking for applications to drive this business forward, this is pretty disappointing," said senior analyst Mark Verbeck at Epoch Partners in San Francisco.

In speaking to the BBC, Oracle's Mr Ellison noted that with the slowing in the US, the company is looking to Europe to shore up its bottom line.

"With the slowdown in the US, and Europe being fairly strong - comparatively - we still expect the European business to be healthier and grow faster than the United States," he said.