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Oracle's Self-Praise Conflicts with Analyst Findings

Number two software developer Oracle Corp. has initiated a wave of self-promotion to stem the tide of recent criticism from analysts in the software sector.

Today, WR Hambrecht opened coverage of Oracle with a neutral rating, citing risk associated with the Redwood City, Calif.-based company's competitive strategy. Oracle has branched out into several uncharted waters recently as it rivals its main competitor Microsoft and, most recently, IBM's foray into offering software for sale on the Net. But the company has met criticism for extending itself too far in an unknown environment.

WR Hambrecht's business applications analyst Rich Petersen said Oracle's relatively high price-to-earnings-to-growth premium and suite-focused strategy were the key components that spurred the neutral rating.

"We think Oracle's earnings visibility will remain impaired for a longer period [then other software companies] because Oracle has recently begun to compete in more markets, and we think this change brings additional risk to the business," Petersen said.

WR Hambrecht did not release a price target, but said fair value fell around $14.00. In early morning going, shares in Oracle were trading at $15.94.

Oracle has stretched into new markets in hopes of uncrowning Microsoft. Databases remain a primary source of revenue for the company and its Web-based Oracle9i database management system software -- employed by over 8,500 companies to store and access data across numerous platforms -- has been scaled up by an application server for running e-commerce applications that tie into its databases.

Goldman, Sachs & Co. said Oracle's database business suffered from a more mature market and a current slowdown in capital spending on computer hardware software and communications technology.

"We have reduced our estimates of Database growth for the May quarter to a decline of 5-10% from a flat estimate previously as evidence has continued to mount, particularly as we approach the end of the quarter, of delays in closing orders, smaller deal sizes, and aggressive end of the quarter pricing," the research firm's release said.

Goldman also cut database growth from 13% to 8% for fiscal 2002.

Peterson was a bit more generous saying Oracle should benefit from an industry that is projected to more than double to $120 billion by 2004.

The current slowdown in technology spending has not been lost on Oracle.

For its part, Oracle sent out a prepared statement that listed 20 new customers scheduled to dip into its integrated 11i e-business applications suite for sales and support services.

Tropicana Products and Kvaerner Pulping Inc. are among the member companies signed-up to do business with the would be software king.



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