Oracle shares drop despite profitable quarter

Even though Oracle is throwing around a billion dollars and even though the company will make its forecasted revenue targets, IT News is reporting that Oracle’s December 18th release of quarterly results might not be all that hot. In fact, IT News opines, “Oracle investors are assuming the crash position in anticipation … after several sources warned that Oracle will fall significantly short of its technology division (i.e. database) sales expectations.”

In fact, Oracle has been witnessing a selling off of its stock in recent days. Last Monday, MSN Money reported that Oracle shares had dropped five percent in value – its largest fall in a year – because “Lehman Brothers Inc. analyst Israel Hernandez said earlier that Oracle’s North American database sales were probably less than estimated. Sales were slow in the United Kingdom and France, but ‘weakness appears most pronounced in North America,’ Hernandez said, adding that second quarter sales will probably miss Lehman’s $871 million estimate.” The next day Oracle stock took another five percent hit. By Thursday, things had picked up a bit, but Oracle shares fell to close at $17.88 on the NYSE, representing a seven percent drop from Monday’s price.

In the last quarter (ending August 2006 and representing first quarter for Oracle fiscal year 2007), Oracle Corporation report a profit, thanks to some US $20 billion in acquisitions. Oracle’s numbers rose approximately 19 percent to a total profit of about US $881 million, as reported by Goldman, Sachs & Co.’s Rick Sherlund. According to Bloomberg’s online edition, “In June, the company forecast net income for the quarter ended Aug. 31 would rise to as much as US $591.7 million or 11 cents a share, from US $519 million, or 10 cents, a year earlier.”

Last week, Oracle made waves in the industry by proposing another huge-money would-be acquisition, that of i-flex Solutions Ltd. Oracle has announced the company would put up $1.3 billion for outstanding shares; Oracle wants 90 percent interest in the company.

Such a massive outpouring would seem to indicate continued success, but as the IT World piece notes, “Distinguishing Oracle’s bluster from business reality is frequently a tricky task for those tracking the company.” The IT World piece goes on to discuss the recent Red Hat brouhaha with “Oracle knocked Red Hat’s business for a loop two months ago when it announced that it would compete with Red Hat for support contracts for Red Hat Linux. It’s too early to know how that move will affect Oracle’s bottom line (or Red Hat’s), but a recent study suggests the gambit may pay off for Oracle more as a marketing ploy than a new business segment.”

For the second quarter in the fiscal year, Oracle had predicted a software license revenue increase of 15 to 20 percent over last year, and an overall software revenue increase of 19 to 21 percent. These targets are expected to be met.

Stacy Cowley’s “Soft database sales could dent Oracle, analysts warn” can be read in full at ITNews.com.au.