Skip to main content

Oracle Corp.'s lower-than-expected results are raising fears that companies are delaying investments on technology amid concern that the global economy may slow.

The database giant's stock plunged the most in almost a decade in New York on Wednesday and triggered a rout in technology shares across Europe and North America.

Unlike most firms, Oracle has a fiscal quarter that ends Nov. 30. Its earnings, reported after the close of market Tuesday, provided investors with a relatively up-to-the-moment glimpse into whether large corporate purchasers are cutting back – and the news wasn't good.

Story continues below advertisement

"The concern is whether the macro-economic climate has declined in recent weeks and whether that's causing a shift in customer-spending intentions," said Thanos Moschopoulos, a Canadian software analyst in Toronto at BMO Nesbitt Burns. "We have this data point which is Oracle, one of the largest tech companies, coming in with disappointing numbers, and that's what's prompting the caution. What the market's saying today is: maybe it's broader than just Oracle."

Technology shares suffered the only decline among the 10 industry groups in the S&P 500 and had the biggest drop among 19 groups in the Stoxx Europe 600 Index. Oracle, the world's second-biggest maker of software, plunged 11.7 per cent, the steepest decline in the U.S. benchmark index. SAP AG, a large German rival, fell the most in Europe.

The U.S. company reported profit before some costs last quarter of 54¢ (U.S.) a share and revenue of $8.81-billion, compared with the 54¢ a share and $9.23-billion expected on average by analysts surveyed by Bloomberg. The company forecast its sales will rise between 1 per cent and 5 per cent this quarter, well below the 7.4 per cent that had been estimated by analysts.

"Oracle is really a bellwether and the number was surprisingly weak, and that does not bode well for the industry outlook," said Mark Lin, who holds Oracle shares in the technology fund he manages in Montreal for CIBC Global Asset Management Inc.

"Oracle posted a substantial shortfall for a company that is typically quite predictable," Richard Davis and David Hynes, analysts at Canaccord Genuity Corp., said in a research report. The analysts cut their investment rating on Oracle's stock to "hold" from "buy."

Wednesday's rout in technology shares led to decreases of more than 3 per cent at companies ranging from Accenture Plc and Amazon.com Inc. to Citrix Systems Inc. and International Business Machines Corp.

On the Toronto Stock Exchange, Celestica Inc. fell 1.8 per cent, and Open Text Corp. sank 5.4 per cent, while Canada's benchmark stock index rose.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter