THE DAY AHEAD: Oracle's applications growth leaves Wall Street grumpy

COMMENTARY -- With Oracle (Nasdaq: ORCL), it's always about the numbers behind the numbers. Oracle had analysts grumpy initially over the first quarter's disappointing applications software growth.

But don't worry, said Oracle honcho Larry Ellison. The second quarter will be "a spectacular applications quarter," he said. In fact, Ellison dropped the word "spectacular" at least six times on an analyst conference call. For variety, Ellison used "amazing" to describe the upcoming quarter.

And so goes analysts' on/off love affair with Oracle and Ellison. Ellison has a way of overstating things, and then his lieutenants have to talk him down. Analysts play along because historically Oracle delivers, but the guidance leaves much to be desired.

Watch those research notes this morning. Analysts have a coin flip between a first quarter that disappointed in some areas and promises of a spectacular, amazing, not to mention extraordinary, second quarter. No one knows how it'll actually play out.

Oracle topped estimates Thursday with earnings of 17 cents a share on sales of $2.3 billion, but the big thing to watch was the sales breakdown. Applications sales of $156 million represented a 42 percent growth from the year-ago period. Revenue from Oracle's core database business increased 32 percent to $585 million. Services revenue rose 8 percent to $1.5 billion.

Sounds impressive, but Chris Shilakes of Merrill Lynch earlier this week projected 70 percent growth in applications, driven by the 11i Web suite. Shilakes said Oracle had a hot new product and an easy comparison. Shilakes wasn't alone.

Oracle CFO Jeff Henley acknowledged that applications sales growth is "the hardest one to call." Henley said the company should produce applications growth of 50 percent for the year, but "there's tremendous upside." How much upside? Ellison said 100 percent growth is possible. "It's going to be a breakout year for applications," he said.

Folks, that's how expectations get out of whack in the first place. Ellison said the sales cycle for the Oracle11i suite is long and the company didn't move as many units as it would have liked in the first quarter. That only sets up a strong second quarter, said Ellison.

But you never can tell. Ellison said he's hoping Oracle can smooth out those backloaded quarters because he's getting too old for the drama. Wit SoundView analyst Jim Mendelson had a quick reply. "I think a lot of us are feeling that way," he said.

Other items worth noting ...

Adobe (Nasdaq: ADBE): Nothing to worry about from these guys. Adobe easily topped analysts' estimates in its third quarter with a profit of $78.3 million, or 61 cents a share, on sales of $328.9 million. It also set a 2-for-1 stock split.

Sales were slightly ahead of Wit SoundView's high revenue estimate. A new version of Adobe's Illustrator software drove sales. Adobe has done a great job of making its publishing software Web enabled and now is reaping the benefits.

The company is projecting revenue growth of 25 percent in 2001 and continues to build new businesses. Adobe recently acquired e-book company Glassbook in an effort to cash in on the electronic publishing business. On a conference call, officials said Adobe can use Glassbook's technology to offer a series of services. The e-book market isn't mature yet, but Adobe reckons it can collect revenue from hosting, royalties and software down the line.

Adobe also derived 63 percent of its sales from the Windows platform in the quarter, with 37 percent deriving from the Mac platform.

Dot-com tales: The Musicmaker.com (Nasdaq: HITS) story has really unraveled. We flagged this company before it even started trading last year, but no one seems to read the regulatory filings these days.

The company, which is for sale by the way, announced a 1-for-10 reverse stock split on Thursday, and shares promptly fell 11 percent to 72 cents. The reverse stock split may keep Musicmaker listed on the Nasdaq, but we hope it doesn't indicate the latest dot-com trend.

For those of you keeping score, Musicmaker went public in July of 1999 priced at $14 (one-year chart). Send your thank you letters to Ferris Baker Watts, the underwriter that brought this gem public.

And you gotta hand it to privately held TVWorldwide.com, a Web-based global TV network and streaming video service provider, for coming up with an interesting advisory board. The company said Thursday that it named astronaut Buzz Aldrin, also a TVWorldwide.com co-founder, and J. Geils, head of the J. Geils Band, to its board.

We can hear the meetings now. Buzz starts meetings off with some moonwalk stories and then J. Geils starts a medley of "Centerfold," "Love Stinks" and "Freeze Frame." TDAIN