Oracle Shares Slump on Profit Plunge, Grim Outlook

The Redwood Shores, Calif.-based company posted a profit of $342.7 million, or 6 cents per share, for the quarter ended Aug. 31, a 33 percent drop from $510.6 million, or 9 cents per share, at the same time last year.

The results were released after the close of markets Tuesday. Shares of Oracle slid nearly 10 percent in early Wednesday trading.

If not for losses on its investments in other companies, Oracle said it would have made $386 million, or 7 cents per share. That matched the consensus estimate among analysts polled by Thomson First Call.

Virtually all of Oracle's investment losses of $80.6 million stemmed from its holdings in software maker Liberate Technologies, whose stock has plummeted by 85 percent so far this year.

Dragged down by sluggish sales of new software, Oracle's revenue totaled $2.03 billion in its fiscal first quarter, a 10 percent decline from last year. The revenue fell below analysts' consensus estimate of $2.06 billion.

The company's sales of new software licenses plunged 23 percent from last year, to $549 million, deepening a slump that began in late 2000.

In contrast to past quarters during the downturn, Oracle's performance deteriorated more dramatically internationally than in the United States, said Jeff Henley, the company's chief financial officer.

The overseas deterioration occurred just as the worst appeared to be over in the United States, making it even more difficult for Oracle to predict when its results will improve, Henley said.

"It's very difficult to see where we are going," Henley told analysts during a conference call. "The rate of recovery could be a little slower than I thought a quarter ago."

Oracle expects its sales of new software licenses to slip by another 10 percent to 15 percent during the quarter ending in November, causing total revenue to fall by 4 percent to 7 percent compared to last year, Henley said. The company expects its earnings in the current quarter to be 8 or 9 cents per share. The consensus estimate among analysts surveyed by First Call is 9 cents.

The tepid outlook seems unlikely to comfort investors looking for signs of a high-tech turnaround.

"The quarter unexpectedly had a downward bias," said Banc of America Securities analyst Bob Austrian.

Oracle's shares fell 86 cents, to $8.17, in Wednesday morning trading on the Nasdaq.

Henley blamed Oracle's financial lethargy on a high-tech slump that he described as the worst in 27 years.

Industry analysts say glitches in new software products, price wars with rivals and a backlash from customers alienated by Oracle's aggressive sales tactics also have contributed to the company's misery.

To offset some of its sales losses, Oracle trimmed its expenses to $1.45 billion in the quarter, a 5 percent reduction from last year. The pruning included a 1 percent decrease in Oracle's work force, translating into the elimination of about 600 jobs between May and September, Henley said.

By December, Oracle expects to jettison 500 or 600 more jobs, primarily in its international operations, Henley said. The anticipated cuts will pare Oracle's payroll to about 41,000 employees, 4 percent below a peak of 42,800 in mid-1999 when the company set out to become the leader in Internet software.

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