Updated from Nov. 11
Shares of enterprise software maker
gained back some lost ground Tuesday, a day after the company's CFO affirmed guidance with a tone slightly more cheerful than in recent reports.
In recent trading, shares of the software company were up 39 cents, or 4.3%, to $9.47. Monday, shares of Oracle closed down 50 cents, or 5.25%, to $9.05 after analysts voiced concerns about the company's sales force.
With two weeks remaining in the quarter, OracleCFO Jeff Henley reiterated second-quarterguidance Monday and cast high hopes for the software maker's latest new product, which targets markets dominated by behemoths Microsoft
During an afternoon meeting with financial analysts atthe company's annual OracleWorld conference in SanFrancisco, Henley struck a slightly more upbeat toneabout the year's outlook than expressed in thecompany's earnings call in September.
Henley said pricing and close rates have stabilized,while business in the second quarter ending inNovember in Europe ought to be better than it was inthe first quarter, which ended in August.
"I'm increasingly encouraged," said Henley, whoacknowledged he has been wrong before about whenbusiness would pick up. "We're optimistic, otherwisewe'd be cutting more people."
By contrast, in September, Henley said he was less
optimisticaboutthat the company would see full-year revenue growth,based on first-quarter results and what the companywas seeing in the second quarter.
"Our assumption is in calendar year 2003 thingsstart to pick up again," Henley said in aquestion-and-answer session with press Monday morning.Though he acknowledged he does not have a lot ofvisibility, Henley added, "Our assumption is we'restarting to bottom out."
Specifically, Henley said he expects the company'srevenue will start growing again in the first half ofcalendar year 2003, which corresponds to the secondhalf of the company's fiscal year 2003.
He also said the current quarter would see earningsof 8 cents to 9 cents a share, compared to 10 cents ayear ago. He said he expects total revenue to fall 4%to 7% from a year ago, which would bring it to between$2.19 billion and $2.27 billion. That's the sameguidance he gave on the company's last earnings callin September.
Previously, Henley said new-license revenue wasexpected to decline 10% to 15% compared to theyear-ago period, which suffered because of the Sept.11 terrorist attacks and at the time was called thecompany's "toughest" quarter in a decade by CEO LarryEllison.
The company typically closes 60% or more of itsbusiness in the last month of the quarter, which endsin November.
Henley said Oracle is not planning any more layoffsother than the few hundred in Europe, primarily inconsulting, announced in Oracle's last earnings call.
Oracle executives used OracleWorld to showcase itslatest product, called the collaboration suite, andannounce its second release. Henley said customers areshowing unprecedented interest in the product, whichmanages email, voice mail, calendars and text files ina single repository. The collaboration suite, whichwas unveiled in July and began shipping in September,takes on Microsoft's Exchange Server used to manageOutlook and IBM's Lotus Notes.
"We've never seen this much interest this early,"Henley said.
Mark Jarvis, Oracle's head of marketing, said part ofthe reason for the interest is the scanty innovationin the market in recent years and frustration amongMicrosoft customers who have been forced to change tothe company's new subscription licensing program.Oracle is hoping it can nab some Microsoft customersconsidering upgrades to their Microsoft Exchangeserver. The advantage over Microsoft, Oracleexecutives say, is stronger security, easieradministration and lower cost.
Jarvis said there are 50 pilots currently running thecollaboration suite. However, a handful of casestudies distributed indicated some companies wereusing only one component of the suite, such as thecalendaring software.
Analysts, however, are expressing skepticism aboutthe new product. In a note Monday, Thomas Weiselanalyst Robert Schwartz said Oracle has misstepped inthis area before and will be challenged to change itsperception as a high-cost provider of enterprisesolutions. Schwartz has a buy rating on the companyand his firm has not done banking for Oracle.
Schwartz said investors also should be concerned aboutrecent changes in the Oracle sales team. Inparticular, Executive Vice President Keith Block isnow running North American Sales, Consulting andApplications Development Marketing for industries.George Roberts still oversees North American sales butnow reports to Block, who previously ran only NorthAmerican consulting. Mark Barrenchea, formerly themarketing face of Oracle's e-business suite, has leftOracle, according to Schwartz.
"The mid-year shuffle does not bode well for thisquarter, in our view," Schwartz said in his note.
Also Monday, Deutsche Bank analyst Timothy Dolandowngraded his rating on Oracle to hold from buy basedon valuation, following other analysts who loweredratings in the software sector last week for the samereason.
Dolan also said that despite the company's dismissalsof rumors about sales force cuts, his checks havefound the sales force is worried about a cut that mayhappen at the end of the quarter. (His firm hasn'tdone any investment banking business with Oracle.)
Dolan noted that Oracle has been trading above his $9target price for several weeks and raised that targetMonday to $9.70 "to reflect improved marketsentiment." The company is trading at 25 timesearnings, but Dolan said he believes a multiple in therange of 22 is more appropriate based on his estimateof Oracle's long-term growth rate of 12.5%.