Oracle Picked a Tough Week to Report

SAN FRANCISCO -- Investors are bracing themselves for Oracle's(ORCL Quote) first-quarter report, due out Thursday after the close of trading.

With a business model that insulates it from immediate shifts in the economy, the software company's performance has proved resilient in recent quarters.

Now, in the wake of bad economic and sector news this week, most analysts appear to be keeping faith that the turmoil hasn't undermined Oracle's results, even if investors are not: The stock has lost 7.6% this week, closing Wednesday at $18.10. The iShares S&P GSTI Software Index(IGV Quote) lost 8% during the same period.

On Tuesday, Forrester Research lowered its growth projections for 2008 U.S. IT spending, with the dropoff beginning to show in the calendar quarter that ends in two weeks. For software, the firm projects spending growth of 7.1% for full-year 2008, from its prior outlook of 11%.

Forrester believes markedly slower growth in domestic IT spending already took hold in the third calendar quarter, says analyst Andrew Bartels. "We thought that even before this week's news" from Lehman Brothers(LEH Quote) and Merrill Lynch(MER Quote).

"What happened on Wall Street amplifies" the latest downturn, because financial institutions will become even more conservative in their spending, Bartels says.

What's more, the 12 months that began in July will be markedly slower than the first half of 2008, says Bartels.

Yet analyst Kim Caughey of Fort Pitt Capital Group says Oracle should deliver as expected because its guidance was cautious.

"I think they will meet expectations," possibly driven by sales to government agencies, as opposed to financial services, says Caughey. She expects Oracle's business to show strength outside North America.