Media
Why Oracle Coverage Missed Mark
Marek Fuchs
03/29/08 - 09:21 AM EDT
This weekend, allow me to provide an important fill-out on the way the world works.
Oracle(ORCL Quote - Cramer on ORCL - Stock Picks) reported this week a third quarter that was slightly disappointing, with the company pointing to weakness in the last weeks of the quarter.
Oracle worked in a confined space with that explanation, and the business media foot their ladder for them, like usual. And that was that.
But that was not good enough. You deserve to know why this tightness toward the end of a quarter is a feature of doing business as a public company in a bad economy. Consider it when you look at Oracle or, going forward, any other public business that has businesses as clients.
Safra Catz, Oracle's co-president and chief financial officer, said:
"Deals are getting done, although they took a bit longer than expected in the last few days of the quarter." It was, she said, because of the tough economic climate, which would mean that the economy worsened toward the end of the quarter.
The Business Press Maven will weaken with age if he has to catalogue all the business media outlets that dutifully ran with this link to the last days of the quarter having larger meaning for Oracle and its close cousins Cisco (CSCO Quote - Cramer on CSCO - Stock Picks), IBM (IBM Quote - Cramer on IBM - Stock Picks) and Intel (INTC Quote - Cramer on INTC - Stock Picks). Look at The Wall Street Journal article:
"Oracle Profit Rise Fails to Calm Investors
New Software Sales Hit
Lower End of Forecast;
Tech-Spending Jitters."
They also reference Oracle's acquisition binge, noting that it did not save the company:
"Oracle Corp. reported a 30% profit jump and 21% revenue increase for its fiscal third quarter -- but the results still stoked investor concerns that its many acquisitions haven't insulated it from economic woes, driving its shares down in after-hours trading."Next comes talk about the "clues" Oracle is leaving about how its recent performance will impact the entire technology industry. It is leaving and will continue to leave clues, but not in the way the Journal and others are assuming. This is all about the pace of effects of the economic slowdown as a quarter comes to a close ... and not just on the technology industry. Did the economy really get any worse in the waning days of the quarter? Of course not. Please let this idea inform your thinking on every public company that has business clients until the economy stops moving at underwater speed: At the end of the quarter, all clients of public companies are in the driver's seat. The public company trying to sell something is over a barrel. The purchaser knows they have numbers to hit and whiny investors and analysts to face if they miss. The customers have to cut prices and offer deals, as customers play hard ball. That means that as a savvy investor, you must always factor in fades in the final weeks of quarters. Never let it surprise you or be written off as a consequence of the larger economy. This phenomenon does not apply as much to companies that sell exclusively to the public, as members of the general public are obviously not very aware of the ending of quarters. But businesses sure are. And now, a note of nerdy fun, as it takes so little to humor either financial or media geeks. Look at this Wall Street Journal New Alert headline that fell into my inbox: "J.P. Penney Slashes Guidance, Citing Macroeconomic Pressures." Got that? J.P. Penney. Not J.C., har-har. In this economy, I guess we should just be thankful that we're not dealing with: "J.C. Morgan Announces Writeoffs and Renaming to Reflect Discount Reality." Got that? J.C. Morgan. Not J.P. I'm killing myself here. I hope you're laughing along.
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