analyst Neil Herman this morning downgraded
to buy from strong buy and lowered his earnings estimate for 2002.
The analyst's reasoning was as easy to follow as a crisp 6-4-3 double play: Server sales at
are down. More Sun servers are shipped with Oracle software than anything else. Ergo, fewer Sun sales mean fewer Oracle sales.
"Weak results and guidance from Sun only serve to compound our near-term worries," Herman wrote to investors, dropping his 2002 earnings target to 49 cents a share, below the current Wall Street consensus expectation of 52 cents.
Oracle's fourth quarter tends to be a strong one, but it might not be this year, according to Herman. With Sun sales off, the U.S. economic slowdown working its way through the business cycle and international markets weakening, the analyst said Oracle's quarter could be "unusually weak."
Also, given that Oracle's stock price has gained 49% since April 3, Herman said the stock could be too expensive. "With its rise over the last two weeks, shares of Oracle are trading at a significant premium to the historic range on both a
price-to-earnings and revenue multiple basis," he wrote. Oracle closed at $19.75 on Friday. Its price has ranged from $13 to $46.46 over the past year.