[ZDNet] Oracle's applications growth leaves Wall Street grumpy

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From: Linda (joelinda1@home.com)
Date: Fri Sep 15 2000 - 20:23:46 PDT

[Ouch, Oracle lost 7% in stock price today after their earnings
release (yesterday, after close.) Adam, you were right about this
company and its CEO. It's just too bad that the sell-side analysts
didn't clue in sooner.



September 15, 2000 7:27am
THE DAY AHEAD: Oracle's applications growth leaves Wall Street grumpy
By Larry Dignan TDAIN ZDII
COMMENTARY -- With Oracle (Nasdaq: ORCL), it's always about the numbers
behind the numbers. Oracle had analysts grumpy initially over the first
quarter's disappointing applications software growth.

But don't worry, said Oracle honcho Larry Ellison. The second quarter
will be "a spectacular applications quarter," he said. In fact, Ellison
dropped the word "spectacular" at least six times on an analyst
conference call. For variety, Ellison used "amazing" to describe the
upcoming quarter.

And so goes analysts' on/off love affair with Oracle and Ellison.
Ellison has a way of overstating things, and then his lieutenants have
to talk him down. Analysts play along because historically Oracle
delivers, but the guidance leaves much to be desired.

Watch those research notes this morning. Analysts have a coin flip
between a first quarter that disappointed in some areas and promises
of a spectacular, amazing, not to mention extraordinary, second quarter.
No one knows how it'll actually play out.

Oracle topped estimates Thursday with earnings of 17 cents a share on
sales of $2.3 billion, but the big thing to watch was the sales
breakdown. Applications sales of $156 million represented a 42 percent
growth from the year-ago period. Revenue from Oracle's core database
business increased 32 percent to $585 million. Services revenue rose
8 percent to $1.5 billion.

Sounds impressive, but Chris Shilakes of Merrill Lynch earlier this
week projected 70 percent growth in applications, driven by the 11i
Web suite. Shilakes said Oracle had a hot new product and an easy
comparison. Shilakes wasn't alone.

Oracle CFO Jeff Henley acknowledged that applications sales growth
is "the hardest one to call." Henley said the company should produce
applications growth of 50 percent for the year, but "there's
tremendous upside."

How much upside? Ellison said 100 percent growth is possible. "It's
going to be a breakout year for applications," he said.

Folks, that's how expectations get out of whack in the first place.
Ellison said the sales cycle for the Oracle11i suite is long and the
company didn't move as many units as it would have liked in the first
quarter. That only sets up a strong second quarter, said Ellison.

But you never can tell. Ellison said he's hoping Oracle can smooth out
those backloaded quarters because he's getting too old for the drama.
Wit SoundView analyst Jim Mendelson had a quick reply. "I think a lot
of us are feeling that way," he said.

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