Investors Echo Analysts' Pessimism on Software
Shares of software vendors plummeted Monday, erasing gains from last week as two analysts lowered estimates and another suggested Oracle (ORCL) could warn this week.
i2 Technologies (ITWO) lost 31 cents, or 7.9%, to $3.64 and Veritas shares dropped $1.21, or 5.3%, to $21.46. PeopleSoft (PSFT) declined 94 cents, or 4.6%, to $19.59; Manugistics fell 33 cents, or 4.1%, to $7.58; Oracle dropped 31 cents, or 3.9%, to $7.61; and Siebel fell 43 cents, or 2.4%, to $17.82.
Lehman Brothers software analyst Neil Herman on Monday lowered ratings and estimates on several software stocks, citing comments from the AMR Research Conference last week that there are no near-term signs of significant improvement in the IT environment. UBS Warburg analyst Ken Carey lowered estimates but did not change his ratings.Both analysts expressed concerns about Europe's extended summer holiday contributing to an even weaker-than-usual third quarter, which ends in September. Both said they expect third-quarter results to be flat sequentially. In addition, CIBC World Markets analyst Melissa Eisenstat said she believes Oracle, whose fourth quarter ended Friday, could miss the consensus estimate for earnings per share of 12 cents and warn this week. Her forecast calls for Oracle to earn 11 cents a share. In the past, Oracle has issued a warning on the first business day after its quarter ends, which would be Monday. Both Eisenstat and Herman said layoffs loom on Oracle's horizon. Citing a company spokeswoman, Reuters reported Monday that the company cut 200 developers -- or about 2% of its total development staff -- as part of a previously announced restructuring of its troubled applications business, which has suffered from bugs. Herman said he also has heard from multiple sources that German software maker SAP (SAP) also will cut U.S. staff in the next several weeks. Eisenstat, who has a hold rating on Oracle, said she has heard that field staff was trying to close deals under $10,000 in order to bring in some kind of revenue in the fourth quarter. These people have quotas that run into the millions of dollars and normally would be seeking six-figure deals, she said in her note. Her firm hasn't done any banking with Oracle.
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