Oracle Corp. ’s profit missed Wall Street’s forecasts for the first time in a decade after new software sales sputtered, hammering its shares and stoking fears that a global economic slowdown is hurting tech spending.
Shares in the world’s No. 3 software maker plunged more than 10 per cent after executives also unveiled weak sales projections for the current, fiscal third quarter.
The company posted an unexpected sequential decline in the revenue it gets for providing maintenance on its software products – one of the most lucrative parts of its business.
That hasn’t happened since the fall of 2008, when the financial crisis began with the collapse of Lehman Brothers, said Cowen & Co. analyst Peter Goldmacher.
Analysts warned that Oracle’s dismal fiscal second-quarter results boded ill for industry peers. SAP AG’s U.S. stock was down 5 per cent, while Salesforce.com Inc. was off 2 per cent in after-hours trading.
“Tech spending is more under pressure than people thought,” Mr. Goldmacher said. “IT budgets have been relatively flat, when you have issues like you do in Europe, people naturally pull back.”
Oracle was among the first major technology companies to report results spanning November, offering the latest snapshot of the state of worldwide IT spending. Some analysts said its disastrous showing presaged weaker results from the industry.
It reported profit excluding items of 54 cents (U.S.) per share in its second quarter ended Nov. 30, missing the average analyst forecast of 57 cents, according to Thomson Reuters I/B/E/S.
“Every technology company is going to get hit. This is just the start,” said Global Equities Research analyst Trip Chowdhry.
Signs are emerging of a widening global economic slowdown as Europe, which experts say is headed into a recession, gropes for a solution to its over-indebtedness.
Oracle has heavy exposure to the region. New software sales rose 2 per cent from a year earlier to $2-billion during the quarter. Analysts, on average, were expecting new software sales of $2.2-billion, according to StreetAccount.
For the current, fiscal third quarter, Oracle on Tuesday projected new software sales growth of zero to 10 per cent, lagging an average forecast for about 7 per cent growth according to StreetAccount.
The company also reported that hardware product sales fell 14 per cent to $953-million, below the average Street account forecast of $1.06-billion. On Tuesday, executives told analysts on a conference call that it expected hard revenue declines of between 5 and 15 per cent. StreetAccount had compiled an average forecast of a dip of 0.5 per cent.
Oracle’s software maintenance revenue fell to $3.99-billion during the second quarter from $4.02-billion in the first quarter.
The company’s shares fell to $26.15 in extended trade from their Nasdaq close of $29.17.