A Hint From Oracle That It Might Not Warn - TheStreet

In a signal it may not preannounce an earnings disappointment,


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said late Friday that it will report fiscal fourth-quarter and full-year 2002 results June 18.

Investors have worried for weeks that Oracle would warn, contributing to a slide in the software company's shares early this month to their lowest

level in almost two years. Oracle closed Friday down 52 cents, or 5.5%, at $8.85. Analysts said that Oracle's announcement of a date for reporting results is a clue that the company does not intend to warn of disappointing results after its fourth quarter ends May 31.

"I think it could be a slight signal of confidence that they may have enough

business already and enough visibility to feel they'll make the wide range of estimates," said Robertson Stephens analyst Eric Upin, who has a hold rating on Oracle. His firm hasn't done any banking business with Oracle.

That does not necessarily mean Redwood Shores, Calif.-based Oracle will make license revenue numbers, however, said Jon Ekoniak, senior business commerce and software analyst at U.S. Bancorp Piper Jaffray, who has a market perform rating on Oracle. But "just looking at it and looking at how they've done things in the past, I would generally say it's a positive that they're putting out this announcement a week before the end of the quarter." His firm hasn't done any banking business with Oracle.

Both Upin and Ekoniak also noted that estimates have come down significantly in recent weeks. The current consensus estimate is for Oracle to report earnings of 12 cents a share on $2.6 billion in revenue, according to Thomson Financial/First Call. But the range of earnings estimates from 35 analysts is very wide, starting at 10 cents a share and going up to 15 cents.

"I would not be surprised to see numbers come down from additional analysts," Upin said.

In March, Oracle CFO Jeff Henley said the company expects fourth-quarter earnings to range from 13 cents to 14 cents a share -- down 1 to 2 cents a share from a year ago. He said he expected license "growth" to follow current trends -- declining 25% to 30% from a year earlier.

Even if the company makes earnings numbers, though, Upin said investors should remember that the fourth quarter will be the third consecutive quarter that Oracle's application business will have declined 40% or more year over year and database revenue will have declined 20% or more from a year earlier. In addition to facing economic pressures, Oracle's applications business has stumbled because early versions were plagued by bugs, and its core database business has faced growing competition from


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"You're still seeing a business that is going through a material contraction," Upin said.

The company's numbers are critical, not only for itself but the rest of software. For Oracle, the results represent the fruit of its fiscal fourth quarter, which accounts for up to one-third of the firm's annual sales. For investors in other software stocks, Oracle's showing offers a glimpse of what's to come, because the firm reports its numbers a month earlier than most other software shops.

Oracle preannounced disappointing results for its third quarter, and that was followed by a string of bad news from other software firms a month later, including




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And then there's the possibility that Oracle may still warn of disappointing results for its fourth quarter, although it's certainly slimmer, now that an earnings date has been announced. After all, there is still a week left in this quarter, which is notoriously very back-end loaded.

And it wouldn't be the first time Oracle announced an earnings date and than preannounced disappointing results, though that's relatively rare. Ekoniak said he could think of at least one other quarter in which the company released the date it would report earnings in the morning and then preannounced results after the markets closed.

The likelihood of Oracle pulling another maneuver like that is probably slim, though. "I think they realized they screwed up," Ekoniak said. "This

announcement should mean they're not going to miss, but it's not guaranteed."