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Oracle blames warning on "nervous" executives

The company issues a profit warning for its third quarter, blaming the slowing U.S. economy for sluggish sales of its flagship database software.

Oracle issued a profit warning for its third quarter Thursday as executives blamed the slowing U.S. economy for sluggish sales of its flagship database software.

Oracle executives said the company expects to report a profit of 10 cents per share, 2 cents lower than Wall Street analysts had predicted.

Oracle's stock fell 21 percent to $16.88 in after-hours trading, according to Island ECN.

In a conference call with analysts, Oracle Chief Executive Larry Ellison said Oracle's sales were strong in December and January but that many companies delayed their purchases of Oracle products during the last few days of the quarter, which ended Wednesday.

Ellison blamed the shortfall on the slowing U.S. economy and said sales remained strong in Europe and Asia.

"It's disappointing. A bunch of deals were approved at the vice president and senior vice president level, but once it got to the CFO and CEO level, they were pushed off," Ellison said. "We have a lot of nervous senior executives looking at this economy and being very cautious. They wanted to wait 30 to 60 days to get a read on the economy."

Oracle executives said database software revenue for its third quarter was flat to slightly negative year over year, while applications sales grew 50 percent.

In December, Oracle executives predicted the company would post strong earnings in the coming quarters. Oracle executives had predicted that database software sales would grow 15 percent to 20 percent year over year in the third quarter and that application sales would grow 75 percent.

Oracle is the latest company in the technology sector to issue an earnings warning. Gateway and 3Com announced warnings Wednesday. Others PC giants have also cut their outlooks since the start of 2001, including Apple Computer, Dell Computer and Sun Microsystems.

Oracle plans to give further details about its third-quarter results and provide more guidance for its fourth quarter during a previously scheduled conference call with analysts March 15.

Ellison said the third-quarter deals that fell through were simply delayed and that the companies plan to buy Oracle's software sometime in the future. Nevertheless, Chief Financial Officer Jeff Henley said it may be tough to give Wall Street guidance on fourth-quarter revenue.

"We'll do the best we can...We have less visibility now. No one knows where the economy is going," Henley said. "We can give our thoughts. Obviously, it's difficult to figure out."

Late last year, when PC makers and rival Microsoft were forced to slash their earnings estimates, Ellison and other Oracle executives said the company's fortunes were not tied to those of the PC industry. Instead, Oracle would be immune because it was in the Internet infrastructure software business.

But last month, Morgan Stanley Dean Witter analyst Chuck Phillips questioned how long Oracle could sustain its database momentum, given the fact that at least 30 of Oracle's sizable dot-com database customers had gone out of business. Phillips estimated that 10 percent to 12 percent of Oracle's database license revenue came from dot-coms last year.