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Oracle shares plummet
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December 9, 1997: 3:36 p.m. ET
Stock loses one-third of its value following earnings disappointment
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NEW YORK (CNNfn) - Shares of database maker Oracle Corp. shed one-third of their value Tuesday, one day after the company said slow sales and turmoil in Asia weighed down its fiscal second-quarter profits.
In late afternoon trading, Oracle (ORCL) stock had plummeted 9-3/4 to 22-5/8 on volume of more than 144 million shares, making Oracle the most active issue on the Nasdaq.
Oracle said Monday its earnings rose 4 percent to $187 million, or 19 cents a share, for the fiscal second quarter, ended Nov. 30. Those results were 4 cents lower than the 23 cents predicted by analysts surveyed by the First Call Research Network.
While its revenue rose 23 percent to $1.61 billion, officials said it would have climbed 29 percent were it not for fluctuations in Asian and European currency rates.
In addition to the problems in Asia and Europe, Oracle hinted weakness in its core database software also was responsible for the downturn. Oracle said sales of its core database products rose only 3 percent, leading many to wonder about its future.
A number of analysts on Wall Street rushed to downgrade their ratings of hold or neutral. Among those cutting their ratings on Oracle Tuesday were Bear Stearns, Morgan Stanley, Hambrecht & Quist, Goldman Sachs & Co., Merrill Lynch, CS First Boston and PaineWebber.
Most analysts cut their estimates for the next two quarters. However, they said the long-term outlook for Oracle remains bright.
Esther Schreiber, software analyst for CS First Boston, said she felt the current level of selling was justified since management had assured shareholders that growth would increase in the quarter.
Schreiber said the turmoil in Asia clearly had some impact, but Oracle's problems are wider than that. She said Oracle's immediate problem is its failure to grow its applications business.
"The database market is getting tougher and will get more so next year when Microsoft enters [the market], so the key to growth is applications. Oracle has dropped from the No. 2 applications player to No. 3. That's the real disappointment and is what investors are recognizing," she said.
Schreiber said many on Wall Street were making the argument that Oracle Chairman Larry Ellison himself was at least partially responsible for the downturn since he's shifted at least some of his attention to network computers. (75K WAV) or (75K AIFF).
If, indeed, Ellison has shifted his attention, it has cost him dearly -- at least on paper. According to the latest information on file with the Securities & Exchange Commission, Ellison holds slightly more than 227 million shares, or 23 percent, of the company's stock.
The fall has lowered the value of Ellison's holdings from $7.35 billion at the close of trading Monday to slightly more than $5.1 billion Tuesday.
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Oracle Corp.
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