Shares of Oracle and Sun Sink on Investor Worries

Two of the technology industry’s biggest stars of the late 1990s saw their shares fall to multiyear lows Wednesday on investor concern about the businesses’ near-term prospects.

Network computer systems firm Sun Microsystems Inc.’s shares slumped $1.21, or 15%, to $6.97 on Nasdaq, the lowest price since 1998, after President and Chief Operating Officer Edward J. Zander said he is stepping down after more than 15 years at the firm. He joins a number of key executives who recently have decided to leave.

Software giant Oracle Corp.’s shares dropped 59 cents, or 5.9%, to $9.45 on Nasdaq, their lowest since 1999, on worries that the firm’s results will fall short of expectations in the current quarter.

Though many technology shares have tumbled this year, most of the biggest names remain above their multiyear lows reached after the Sept. 11 terrorist attacks. Sun and Oracle now are exceptions.

Zander, 55, is the fourth high-ranking Sun official in recent weeks to announce plans to step down. Others include Chief Financial Officer Michael E. Lehman, Executive President of Enterprise Services Larry Hambly and Executive Vice President of Computer Services John Shoemaker.

“I know it looks like a flurry here,” Sun Chief Executive Scott G. McNealy said Wednesday. But “I think it’s been positive and planned out. We are on plan in executing just about everything we wanted to do here from a management-succession and organization-structure perspective.”

McNealy will take the title of president as well after Zander departs.

Sun, which makes high-end networking computers and software, has been hard hit in the wake of the collapse of many dot-com and telecom firms that were prime customers for its equipment.

But McNealy said the company is back on track.

“Sun’s in great shape,” he said. “We’ve got $6 billion in cash. We’re on target for meeting our profitability goals this quarter.”

Regardless of their public statements, the Sun managers’ departures to a degree speak to their confidence, said Richard Chu, analyst at SG Cowen Securities.

“They believe they’re leaving the company in good shape. There’s a lot of evidence fundamentally that that’s the case,” he said. “Nonetheless, they’re taking their skin out of the game.”

As for Oracle, analysts said investors have driven the stock lower in recent days on fears that sales aren’t rebounding as hoped.

In March, Oracle Chief Financial Officer Jeff Henley predicted earnings of 13 cents to 14 cents a share in the current quarter. The average estimate of analysts surveyed by Thomson Financial/First Call is 13 cents. Oracle earned 15 cents a share a year ago.

But last week, Henley said at a meeting of investors sponsored by Prudential Securities that “the current environment continues to be very difficult. We don’t know when the economy’s going to turn.”

Oracle has been hurt by pricing pressure and a perception that its Web-based business software contains bugs, Lehman Bros. analyst Neil Herman said in a new report. Herman cut his earnings estimate for Oracle’s current quarter to 11 cents a share from a previous estimate of 13 cents.

Despite the stocks’ nominally low prices, the companies continue to boast high market capitalizations. Oracle is valued at $51.9 billion; Sun is valued at $22.6 billion. Those figures reflect the huge number of shares outstanding from both firms, analysts noted.