Oracle's miss reflects a softening economy
Posted
Mar 26 2008, 06:23 PM
by
Charley Blaine
Rating:
The market's reaction to Oracle's third-quarter earnings was almost a classic "buy the hype, sell the news" event. Except that the hype turned out to be wishful thinking.
The stock had been shooting nicely higher since early March on the supposition that Oracle was going to deliver a blockbuster report today. From a March 4 closing low of $18.44, Oracle shares had jumped more than 14% to $21.08 on Tuesday as investors bet on a strong report.
But when the numbers disappointed, the market slammed Oracle, knocking the shares 8.2% to $19.22 in after-hours trading. The shares had finished off 0.7% to $20.94 in regular Nasdaq trading.
What the report appears to show is that no one may be immune to the economic slowdown. (I could say recession -- probably should say recession -- but I really like to have recessions dated.)
Not that the report was bad. In fairness, it was actually a pretty good report. But the problem for investors today was that Oracle's 16% rise in new software sales was at the low end of expectations. Hence the idea, as Tanalyst Damon Ficklin of Polen Capital Management told Reuters, of "a little bit of a weakening economy" was affecting Oracle's business.
Net income rose 25% to $1.34 billion, or 26 cents per share, in Oracle's fiscal third quarter ended Feb. 29, from $1.03 billion, or 20 cents, a year earlier.
Sales of new software, which investors say is a key indicator of the future performance for business software makers, rose to $1.6 billion from $1.4 billion a year earlier.
In December, Oracle had forecast third-quarter new software sales would be 15% to 25% higher than a year earlier, and analysts had expected the company to report growth around the mid-point of that range.
(Update: More analysis is starting to trickle in -- here's BusinessWeek.)
