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Goldman Tech Conference Notebook: Oracle, Red Hat, Kana and Dell

There's a new buzzword flying around the Goldman Sachs Technology Investment Symposium: iProcurement. Though the term is being thrown around pretty loosely this week, iProcurement mostly refers to Internet software that allows businesses to buy products from one another or from a B2B portal.

Tech Talk
Why You Won't Be Reading Any More Goldman Conference Notebooks
Thus far, the most crowded presentations have been for iProcurement plays such as Commerce One (CMRC), Ariba (ARBA) and i2 Technologies (ITWO), three stocks that haven't exactly had trouble gaining investor interest.

So now the big boys want in. Oracle's (ORCL) stock already has benefited from B2B talk. But now, said Oracle financial chief Jeff Henley, the database and application software maker wants to offer the "broadest suite of B2B solutions." Oracle's concept of having a "portal to go" has analysts such as Lehman Brothers' Michael Stanek saying Oracle "is a core holding coming out of Y2K and the only mega-cap to play B2B." Lehman has a buy rating on Oracle and has done no company underwriting.

Oracle's stock recovery began last June when CEO Larry Ellison told the Street he planned to slash $1 billion in costs over 12 to 18 months and raise pretax margins from the low-20% range to around 30%. Now it's a question of execution, Henley said in an interview with Oracle, remember, surprised the Street back in December 1997 when it significantly missed earnings forecasts. It's taken almost two years for Oracle stock to recover, though lately the stock has been on a tear, roughly tripling since last fall.

Future plans for Oracle, the originator of the network computer concept in 1995, don't include hardware, said Henley. He sees the company continuing its acquisition march -- it has made 25 acquisitions in the past four years -- and partnering with telco outfits. Oracle stock was up fractionally at 59 7/8.

Red Hat Not All That

There was a packed house at the Red Hat (RHAT) presentation Tuesday, and for good reason: Since its October IPO, the company has led a fleet of Linux-centric companies into a red-hot market.

But at least one money manager wasn't that impressed. "I don't see any barriers to entry for bigger companies," says Dan Smith, a research associate with Dain Rauscher Wessels' private client group. "Why can't a larger outfit come in and do the same thing?" Smith said that, overall, "I just don't see why you would want to buy it." Dain Rauscher doesn't own or follow Red Hat stock, which was off 1 at 89 3/8.

Kana's Not Done

After Kana Communications (KANA) said Monday it would buy Silknet Software (SILK) for $4 billion, investors were thinking Kana CEO Michael McCloskey might be done for the time being with M&A.

After all, McCloskey said the company had signed 120 customers in its last quarter, giving it enough business to meet earnings expectations for the next two quarters. So it was a bit surprising to the Goldman audience to hear that the company was looking at some data analytics companies to acquire. "We want to dominate online communications," McCloskey said more than once. No names were mentioned, but data analytic companies say thank you. Kana shares were off 8 1/4, or 3.6%, at 223.

Back and Forth on Dell

Dell (DELL), which is scheduled to report earnings after the close Thursday, took a mild hit Wednesday morning despite a bullish analyst report.

On Tuesday, Warburg Dillon Read analyst Charles Wolf cut his Dell rating from buy to hold, citing the company's PC-centric future. His firm has done no Dell underwriting. Wednesday, however, Salomon Smith Barney analyst Rich Gardner -- who helped send Hewlett-Packard (HWP) up 10 points Monday by raising his first-quarter per-share estimate to 79 cents from 75 -- told clients to buy Dell on weakness. Nevertheless, the stock was off fractionally at 36 3/16.

Dell, which warned Jan. 26 of its second earnings shortfall in as many quarters, is expected to earn 15 cents a share for its fourth quarter ended Jan. 28 on revenue of $6.7 billion. "On the large corporate accounts demand front, we have yet to see a rebound, but believe that upgrade activity will resume in March/April," Gardner told clients. "We would use current weakness in Dell shares as a buying opportunity." Salomon has a buy rating on Dell and hasn't done any underwriting for the company.

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