Oracle’s shares fell by ten percent as the company fell short of Wall Street’s forecasts for the first time in a decade.
Reuters is telling the world and its dog how Oracle’s software and hardware sales are wheezing about and frantically looking for their ventalin. The results are stoking fears that global recession will hurl tech spending into a moderate flame.
What is worrying the cocaine nose-jobs of Wall Street is that if Larry Ellison can slip up, the chances of other more mortal outfits are slim.
HP, Dell Inc, Red Hat, Intel, Texas Instruments and NetApp have all taken a hit. Shares of HP and Dell were down about a percent in after-hours trade and Salesforce.com and SAP were down four percent.
Oracle missed targets on profit, hardware and software sales, and mentioned that this quarter will be just as bad.
Oracle President and Chief Financial Officer Safra Catz attempted to play down the miss saying it was being caused by the “scrutiny of technology investments by cautious customers”.
His theory is that clients want purchases to be approved by more senior executives than in recent years, prolonging the time it took to close deals.
This meant that some big deals during the crucial closing weeks of the quarter did not go through in time. Oracle has adjusted its forecasts to accommodate a lengthier approval process and expects results to be “significantly better” in the current period.
But analysts pointed out that even if this was true it means that the heightened scrutiny may be a symptom that businesses are cutting back on tech. A slowed down approval process is what happens in downturns.
Also worrying is an unexpected sequential decline in the revenue Oracle gets for providing maintenance for its software. This has not been seen since the end of 2008 when the financial collapse began.
One of Oracle’s biggest problems was the widening global economic slowdown as Europe heads into recession. Oracle has a lot of customers in the region.
Software sales rose two percent from a year earlier to $2 billion during the quarter. Analysts, on average, were expecting $2.2 billion.
Oracle predicted new software sales growth of zero to 10 percent, compared with an average forecast for about seven percent.
It also said that hardware sales fell 14 percent to $953 million which was well below the predicted $1.06 billion. Oracle explained that hardware revenue declines of between five percent and 15 percent were expected.
Oracle’s software maintenance revenue fell to $3.99 billion in the second quarter from $4.02 billion.