Oracle Shares Fall On Outlook, But Sector Doesn't

Oracle Corp.

But despite the stature of the company, which ranks behind market leader Microsoft Corp., the news was not enough to drag down the software sector. The S&P Software Index was up nearly 4 percent as the overall market rallied on hopes for an economic recovery.

After Friday's market close, Redwood Shores, Calif.-based Oracle said it will miss its forecast for the third quarter ended Feb. 28 because of slow sales in Asia. The database giant said it expects earnings of 9 cents a share instead of 10 cents.

The news sent shares of Oracle down to $14.71 in after-hours activity from a Nasdaq close of $15.99.

On Monday morning, the stock fell as low as $12.88, its lowest level since October, but later trimmed its losses to trade at $13.42, down $2.57, or 16 percent. It was the worst net loser on Nasdaq.

Sanford C. Bernstein analyst Charles Di Bona said Oracle had been too optimistic in predicting a a rebound on corporate spending on information technology products.

Di Bona said he believes such spending will not perk up until the fourth quarter.

"We would be cautious around stocks that have been more aggressive in their guidance," he said, "and Oracle is one of them."

But Di Bona said the economy is not Oracle's only problem.

The company is facing intense pricing pressure on its core database products, he said, and he has seen no real growth in its new business of applications software, which helps companies perform specific tasks.

Di Bona pointed to Manugistics Group Inc., which competes against Oracle in software that allows companies to conduct business with their suppliers.

On Monday, Manugistics said it expects earnings for the February quarter to exceed expectations. Shares of the Rockville, Md., company soared nearly 19 percent.

Meanwhile, several analysts Monday either cut their ratings on Oracle or lowered their own earnings estimates.

UBS Warburg analyst Ken Carey reduced his profit outlook to 42 cents a share from 45 cents for 2002 and to 51 cents from 55 cents for 2003.

Merrill Lynch cut its rating on Oracle to midterm "neutral" from "buy."

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