Oracle Plunges in Record Sell-Off
A vast sell-off of Oracle shares set a stock market record Tuesday and sent the company’s stock price plunging 29%, a day after the software giant startled analysts with disappointing second-quarter results.
Nearly 172 million shares of Oracle changed hands, and the price of the company’s stock plummeted $9.44 a share to close at $22.94, sending new doubts about the health of the technology sector rippling through an already skittish market.
The heavy volume and price plunge are an indication of Wall Street’s displeasure with Oracle’s disappointing results, which came as a surprise to many analysts, who promptly downgraded their ratings of the company’s stock.
“People feel fairly blindsided,” said Jim Pickrel, an analyst with Hambrecht & Quist in San Francisco. “Until now, the company’s been fairly optimistic.”
The spike in trading also reflects the closeness with which investors track the Redwood Shores, Calif.-based maker of database management software. Oracle is second only to Microsoft in software sales and regarded as a bellwether of the high-tech industry.
Among other issues that declined Tuesday, PeopleSoft, a maker of payroll software, fell $2.31 to close at $34.81 on Nasdaq. Microsoft slipped $1.81 to $144.31, also on Nasdaq. Mainframe computer software stock Computer Associates tumbled $4.94 to $52 on the New York Stock Exchange.
On Monday, Oracle reported a second-quarter profit of $187 million, or 19 cents a share, up from $179 million, or 18 cents, a year earlier. Sales climbed 23% to $1.61 billion from $1.31 billion, partly diminished by currency fluctuations in Asia.
The news that the company missed earnings projections by about 4 cents a share followed several years of spectacular growth. Executives attributed the weak results largely to slowed sales in Asia, where currencies are in chaos, as well as slackened demand from telecommunications companies that are some of Oracle’s biggest customers.
But after a conference call Monday evening, analysts came away with more fundamental concerns about the company’s core database software business.
“Most analysts had been looking for database revenue growth in the range of 15% to 20%,” said Andrew Roskill, an analyst at Salomon Smith Barney Holdings Inc. in New York. “They came in with 3%.”
That prompted Roskill and many other analysts to sharply curtail their projections through the rest of the year. Instead of earnings of $1.10 per share for fiscal year 1998, Roskill now expects earnings of 92 cents per share.
One troubling factor for Oracle is that the focus of the corporate market is shifting from database software toward complete packages for handling payroll, billing and other business essentials, analysts said.
“I’m almost seeing deflationary-type pressures” on database software prices, Pickrel said. “Oracle is still a very solid company, but they have a lot of work to do to regain the consistent earnings growth people had become accustomed to.”
No investor was punished by Tuesday’s stock plunge more than Lawrence Ellison, the brash chairman and chief executive of Oracle. His personal fortune, considered the fourth-largest in the United States, shrank by a whopping $2.14 billion.
The previous record for trading volume in a single day was 152 million shares, held by Comparator Systems, a scandal-plagued Newport Beach company that has since settled allegations of fraud with regulators.
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Most Active Stocks
Here are the 10 most active issues in U.S. stock market history. A stock must have closed above $1 a share to qualify for the list.
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Stock (market) Date Volume (millions) Oracle (Nasdaq) Dec. 9, 1997 171.8 Comparator Systems (Nasdaq) May 6, 1996 152.0 Occidental Petroleum (NYSE) June 18, 1988 103.7 Southern Cal. Edison (NYSE) June 27, 1988 98.8 Pacific Gas & Elec. (NYSE) June 8, 1988 96.8 Southern (NYSE) July 25, 1988 73.7 Intel (Nasdaq) Jan. 17, 1996 68.3 WorldCom (Nasdaq) Oct. 1, 1997 67.9 Intel (Nasdaq) Oct. 15, 1997 66.3 Southern (NYSE) Jan. 25, 1988 65.4
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Source: Bloomberg News
Times wire services were used in compiling this report.
