Few are expecting a particularly good fourth quarter when


(ORCL) - Get Report

reports financial results Tuesday, but the software bellwether may offer some signs of hope.

That Oracle didn't warn of disappointing results is one good signal. Last quarter, the company's

preannouncement ended up foreshadowing a string of similar warnings from other software vendors whose quarter ended a month after Oracle's.

CEO Larry Ellison already

said earlier this month that the Redwood Shores, Calif., company didn't warn because its earnings will at least meet the consensus 12 cents a share gathered by Thomson Financial/First Call. But they still may come in lower than the 13 cents to 14 cents a share the company forecast in March.

On the positive side, Oracle is widely expected to deliver news of improvement in its ailing applications business and could counter recent gloomy

comments from competitor

Siebel Systems


about the state of the overall sector.

However, new software license revenue in the fourth quarter, historically Oracle's biggest of the year, may come in short of guidance from management, which set a range of between $1.16 billion and $1.24 billion. Most analysts have pegged license revenue between $950 million and $1 billion -- 25% sequentially higher than the third quarter but 40% lower than the same period a year earlier.

Even if Oracle's license revenue comes in light, the second-largest software maker is big enough that it could probably make up the difference by cutting expenses, most likely in sales and marketing, said Pat Walravens, an analyst at Jolson Merchant Partners, who has a market perform rating on Oracle. His firm hasn't done any banking with Oracle.

Lower license revenue reported by Oracle also would reinforce what others such as Siebel Systems CFO Ken Goldman have said lately about the environment remaining just as challenging as in the previous quarter, said U.S. Bancorp Piper Jaffray analyst Jon Ekoniak.

"I think there's a lot of bad news already out there," Ekoniak said. "My take is with all this negativity, it's really going to take a disaster for the

Oracle stock to react negatively." Ekoniak has a market perform rating on Oracle and his firm hasn't done any banking with the company.

Oracle is often seen as an early barometer for the rest of the software sector because it reports earnings a month earlier that most other companies. SoundView analyst Jim Mendelson said he expects Oracle to say things aren't getting better but doubts the company will say they are getting any worse. That should temper Siebel's negative comments, he said. "I think to some extent their comments may help the rest of the group a little bit," concluded Mendelson, who has a strong buy rating on Oracle. His firm hasn't done any banking with Oracle.

In the current quarter, however, Oracle may prove a better gauge for larger software companies than smaller ones, given that it didn't warn, unlike smaller players

Tibco Software




(MANU) - Get Report

-- two other software makers whose quarter ends one month earlier than the rest of the sector.

That's because Oracle has more established distribution, a leadership position in its core database market and a greater opportunity to cut costs compared with smaller software makers, noted Credit Suisse First Boston analyst Brent Thill, who has a buy rating on Oracle. His firm hasn't done any banking with Oracle.

Oracle may even have some good news for a change from its foundering applications business. Analysts say they've heard that Oracle has closed some application deals with blue-chip Fortune 500 customers. That would be a plus for the company, which has had trouble building its applications business since it initially suffered from a rash of bugs.

As always, Oracle's guidance will be important to Wall Street. The Street is likely to be comfortable if the company guides within the 40% to 50% sequential decline in license revenue historically experienced by Oracle from the fourth to the first quarter, said Dennis McKechnie, portfolio manager for the Pimco Innovation Fund, which owns shares of Oracle.

But McKechnie said it's a toss-up whether Oracle shares enjoy a boost from its fourth-quarter results. "I don't expect wow-type things," he said. The rise in Oracle shares Monday, he said, was more a bounce for oversold conditions than an early endorsement of what the company may say Tuesday.

Before Monday's upswing, Oracle shares had lost 38.7% of their value since the beginning of the year. Shares climbed 63 cents, or 7.3%, to close Monday at $9.20 in heavy trading. Shares rose to $9.24 in after-hours trading.