Oracle Plunges on Q3 Warning

Oracle (Nasdaq: ORCL) fell US$4.50 to $16.88 in morning trading Friday, after the software maker warned of a third-quarter earnings shortfall.

“License growth was strong in the first two months of Q3, and our internal sales forecast looked good up until the last few days of the quarter,” said chief executive officer Larry Ellison. “However, a substantial number of our customers decided to delay their IT spending based on the economic slowdown in the United States.”

Oracle said it expects earnings per share of 10 cents for the quarter ended February 28th, up from 8 cents in the year-earlier quarter but below the 12 cents reportedly expected by analysts.

“Sales growth for Oracle products in Europe and Asia Pacific remained strong,” Ellison said. “The problem is the U.S. economy.”

Oracle predicted that database revenue growth would be “flat to slightly negative” during the quarter. License revenue rose about 6 percent, with applications revenue growing about 50 percent. The overall revenue gain was about 9 percent, the company said.

Redwood Shores, California-based Oracle said it expects to report results and issue a more detailed outlook for the rest of the year on March 15th.

“With continued uncertainty in the economy, we can’t predict when sales growth will improve,” Oracle chief financial officer Jeffrey Henley said. “However, we can predict that Oracle will continue to use our e-business suite software to move all our business processes to the Internet.”

That plan should boost efficiency and control operating expenses, according to Henley.

“These productivity improvements should allow us to continue to deliver year-over-year earnings growth, albeit at a lower rate than previously expected due to lower revenue growth,” Henley said.

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