THE DAY AHEAD: Oracle hit by quarterly inconsistency

Life for Oracle Corp. (Nasdaq: ORCL) would be so much easier if it could just deliver consistent results quarter to quarter. But there's always something to worry about and the first quarter results are no different.

Here's the pattern for Oracle's last three quarters. In the third quarter, Oracle stumbled. In the fourth quarter, it delivered a hefty upside surprise. In the first quarter, Oracle underwhelmed on revenue and merely met expectations of 16 cents a share.

Oracle: Excuses, excuses?

The problem? After the fourth quarter, Oracle optimism was rampant as shares ran up ahead of the earnings release. So-called "whisper" estimates were about 19 cents a share. The first quarter was supposed to have no surprises and solid results. Analysts said a solid first quarter would have put the skeptics on ice.

It didn't work that way as revenue was $1.98 billion -- light compared to expectations. Revenue was up 13 percent for the first quarter, but sales jumped 22 percent in the fourth quarter.

Prior to the earnings release, Gary Abbott, an analyst with Punk, Ziegel & Knoell, said no news would have been good news. "People are wondering which one is the real Oracle," he said.

Wall Street is still wondering.

Here's the deal: Oracle is an annual results company working in a quarter-to-quarter world.

Part of the problem is that Oracle execs consistently paint a rosy picture for upcoming quarters and don't deliver. In the fourth quarter, executives said the first quarter looked great.

The reality: Many of Oracle's contracts don't close until the final weeks of the quarter, which makes it tough to predict the company's results. "We simply didn't get quite as many big deals in the quarter," chief financial officer Jeff Henley said, during a conference call with analysts. (For a more in-depth explanation of Oracle's quarterly results see Henley's Q&A with ZDII.)

At least you can't accuse Oracle of managing earnings.

Henley & Co. said that in the third quarter Oracle's sales force ran out of time. This quarter was more of the same. Oracle cracked the whip on the sales force in the fourth quarter and impressed Wall Street. Time to crack the whip again.

Oracle's results show how quarter-to-quarter results sometimes don't reflect the full picture. Oracle will post another year of annual growth because it is among the tech leaders. However, it'll be a bumpy, seasonal ride.

"We wish we could make it nice and smooth, I think I could sleep a lot better," said CEO Larry Ellison. "The fact is, there will be some fluctuations. It's just our history, we fluctuate. But taking the long-term view ... we've been pretty consistent on an annual basis."

So what should shareholders do? Focus on Oracle as an annual story and dismiss the quarterly fluctuations and stock volatility.

Henley summed it up in his interview with ZDII.

"There's day traders, there's momentum players, there's just a lot of people that like to speculate and try to guess what this quarter's going to be. And so we've had an enormous run up," he said. "Since the first of September the stock went up over 10 bucks. I don't know what caused all that, but I think that there is some speculation and stuff like that. And when some of that burns off, I guess people are disappointed."

Speaking of consistency...

What does Verity Corp. (Nasdaq: VRTY) have to do to get any press?

The company has consistently blown away estimates and doubled Wall Street consensus first quarter earnings of 32 cents a share.

But Verity will get a one-day run-up and then fade to the background.

Maybe it's the focus on corporate and intranet search tools that keep Verity from getting the headlines. Verity lacks sex appeal, but it's about time this company got the credit it deserves. We've noticed for the last three quarters.

Six investment firms cover Verity and you'd think more analysts would be catching on to the story by now.

IPO glory days coming back?

The PurchasePro.com (Nasdaq: PPRO) initial public offering surge on Tuesday was significant because it could open the door for a host of companies on deck to make market debuts.

And Wednesday, we'll get another barometer when NetSilicon (Nasdaq: NSIL), a maker of embedded chips for networking systems, trades later today. NetSilicon's prospectus has been on ice since March while the company shuffled lead underwriters and had more than its share of headaches before even getting to this point.

NetSilicon priced its 5.25 million shares at $7.

Why does this IPO matter? It isn't a headliner. With a crowded field of young companies going public, second tier concerns such as NetSilicon will go a long way to restoring the confidence of the IPO market.