Oracle stock nose-dives after earnings report falls short of projections

By Jeremy C. Owens

jowens@mercurynews.com

Posted: 12/21/2011 08:06:40 AM PST

Oracle's (ORCL) stock price plummeted more than 14 percent Wednesday morning after the Redwood City software giant reported quarterly revenues and profits that did not live up to internal or external expectations.

The company's stock fell 9 percent in after-hours trading Tuesday night, but the decline continued after the bell rang on Wall Street on Wednesday, with shares trading as low as $24.91, a loss of $4.18, or 14.6 percent, in early trading.

The descent stems from Oracle's earnings for the quarter that ended Nov. 30. While sales, at $8.8 billion, and income, at $2.2 billion, both increased, the gains did not match Oracle's projections for the quarter nor analysts' forecasts for the company.

While sales grew 2 percent year-over-year, Oracle had predicted 5 percent to 9 percent growth; earnings were 43 cents a share, but Oracle predicted 44 to 46 cents a share, and analysts had expected 45 cents a share, according to a Thomson Reuters survey.

Some of the underlying fundamentals of the business caused doubts as well. In the latest period, the company missed several of its own targets. Revenue from new software licenses, a key indicator of future revenue from lucrative maintenance contracts, recorded a 2 percent increase after a forecast of 6 percent to 16 percent growth. Hardware sales were down 14 percent; the company had predicted a decline of 5 percent.

Oracle's projections for the current quarter also came in below analysts' expectations, as the company predicted sales of $8.9 billion to $9.25 billion, less than the $9.45 billion that analysts were predicting; and earnings per share of 55 to 58 cents, after excluding one-time charges, which analysts pegged at 58 cents a share on the same basis.

Oracle is one of the world's biggest sellers of database programs and other commercial software, along with high-end computer hardware. And because its fiscal quarter ends several weeks later than most of its competitors, analysts say the Redwood City company's performance offers the most current view of overall tech spending.

"My sense is that things are slowing out there and Oracle is seeing this first," Brian Schwartz, a tech analyst with the investment firm ThinkEquity, said Tuesday evening. "Buyers are getting more cautious."

Investors on Wall Street seemed to agree with Schwartz on Wednesday, as Silicon Valley stocks and the tech-heavy Nasdaq composite index took a beating in early trading. While the Dow Jones industrial average and Standard & Poor's 500 index showed losses of 0.4 percent and 0.5 percent, respectively, the Nasdaq was down more than 1.6 percent at 8 a.m. Pacific.

Oracle competitor Salesforce.com, based in San Francisco, fell more than 7 percent in early trading, and Palo Alto-based competitor Tibco Software fell more than 13 percent. Palo Alto-based enterprise virtualization company VMware declined more than 8 percent, and open-source firm Red Hat dropped more than 5 percent -- both companies compete for the same spending as Oracle.

At 8 a.m. Pacific time Wednesday, an hour and a half into the trading session, Oracle stock was trading at $25.16, a loss of $4.01, or 13.8 percent.

Staff writer Brandon Bailey contributed to this report. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.