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Oracle sees software slump worsening

Executives say they have seen no signs of the economy recovering and predict that last week's terrorist attacks will further hurt software sales.

Oracle executives said Monday they have seen no signs of the economy recovering and predicted that last week's terrorist attacks will further hurt software sales.

Before last week's tragedy, Oracle executives said they were expecting software sales during the current second quarter would drop from 8 percent to 10 percent, similar to first-quarter results. But in light of the terrorist attacks, Oracle executives said Monday the database giant now expects second-quarter software sales will drop as much as 15 percent.

"We don't think things are recovering, and now, in light of the latest events in New York and D.C., we're anticipating things to be slightly worse," Oracle Chief Executive Larry Ellison said in a conference call with analysts Monday.

Earnings per share for the second quarter, which ends Nov. 30, are expected to be flat year over year at about 11 cents, said Oracle Chief Financial Officer Jeff Henley.

Oracle last week reported profits that narrowly beat analyst estimates, but its first-quarter revenue dropped slightly from a year ago. The software company reported financial results but held off on its conference call with analysts until Monday, when the U.S. stock markets reopened.

Oracle executives see an increase in sales to the federal government. But some industries, such as airlines, banks, hotels and insurance companies, could be hit hard by last week's events, resulting in slower software spending, said J.P. Morgan H&Q analyst Jim Pickrel.

"I don't think that's startling, and they certainly deserve credit for a realistic outlook," Pickrel said. "It's very difficult to know what the impact will be, but they have a diverse customer base."

While it's hard to predict, Henley said he still believes the economy will pick up in the second half of the 2002 fiscal year. "It may be delayed with what happened (last week)," he said. "We should show more profit growth in the second half."

The database giant earned a first-quarter profit of $511 million, or 9 cents a share, compared with last year's profit of $500.7 million, or 8 cents a share. Analysts had predicted average earnings of 8 cents per share, according to First Call.

For the first quarter, which ended Aug. 31, Oracle's revenue dropped about 1 percent, from $2.26 billion in 2000 to $2.24 billion this year.

Overall first-quarter software sales declined 8 percent year over year. Database sales fell 8 percent, with sales in the United States dropping 26 percent. Application sales dropped 6 percent. Revenue from support services increased 9 percent, while revenue from consulting dipped 4 percent and education revenue fell 1 percent.