Goldman Call Sinks Software

SAN FRANCISCO -- The business software sector was dinged by more than just market turmoil Tuesday.

Citing recessionary concerns, Goldman Sachs dialed down its 2008 EPS growth expectations on software stocks Tuesday to 12%, below the Street's outlook for 13%. Notably absent from Goldman's new expectations was Oracle(ORCL Quote - Cramer on ORCL - Stock Picks), which has strong recurring revenue from software maintenance contracts.

Goldman Sachs analysts lowered earnings outlooks for giants Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) and SAP(SAP Quote - Cramer on SAP - Stock Picks).

The iShares S&P GSTI Software Index(IGV Quote - Cramer on IGV - Stock Picks) was recently down 2.6%.

Microsoft shares were down 2.8%, to $32.09, while SAP was off 5.9%, to $46.20.

Also hit were software makers CA(CA Quote - Cramer on CA - Stock Picks), BMC Software(BMC Quote - Cramer on BMC - Stock Picks), Informatica(INFA Quote - Cramer on INFA - Stock Picks), Macrovision(MVSN Quote - Cramer on MVSN - Stock Picks), Red Hat(RHT Quote - Cramer on RHT - Stock Picks) and Tibco Software(TIBX Quote - Cramer on TIBX - Stock Picks). Goldman Sachs makes a market in all of the stocks mentioned, and many of the companies are investment banking clients of the firm.

On-demand software leader Salesforce.com(CRM Quote - Cramer on CRM - Stock Picks) was also projected to slow. Its stock was up a half-percent, to $52.12.

Although Oracle was not among the stocks singled out by Goldman Sachs, its latest acquisition, BEA Systems(BEAS Quote - Cramer on BEAS - Stock Picks), is projected to see slower growth. Oracle announced the buyout of BEA on Jan. 16. Oracle's stock took the brunt of Tuesday's news, dropping 5.3% to $20.44 in recent trading.

Goldman Sachs also lowered its price targets by $2 on both Adobe(ADBE Quote - Cramer on ADBE - Stock Picks), to $44, and Parametric Technology(PMTC Quote - Cramer on PMTC - Stock Picks), to $19.

Adobe was down 3.7% to $34.02, while Parametric was off 3.2% to $14.35.

With most of the sector due to disclose earnings in the coming weeks for the fourth quarter of 2007, Goldman Sachs anticipates solid growth from the sector. For the group, however, analysts expect more conservative guidance for the first half of 2008, likely below consensus.

For the seasonally weaker first half of 2008, Goldman views Microsoft, Autodesk, Citrix, BMC and CA as defensive buys.