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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