Oracle shares tumble as software group warns on profitability

Until a few days ago, Oracle thought itself immune from the US economic slowdown which had damaged the business of other big technology companies like Intel, Microsoft and Cisco. The software-maker, which employs more than 750 workers in Ireland, was confident of continued growth because corporations were still ordering its applications software to cut costs and boost efficiency. But the orders being negotiated had not reached the boardrooms and last week many chief executives refused to sign off on software purchases that had been approved by subordinates. "Those chief executives are just very concerned about the uncertainty they see in the economy," said Oracle chairman Mr Larry Ellison. "Sales growth for Oracle products in Europe and Asia Pacific remained strong. The problem is the US economy."

Oracle shares tumbled as much as 26 per cent when markets opened yesterday after the company said fiscal third-quarter profit had missed forecasts for the first time in three years - an announcement which showed how vulnerable all tech companies have become as their customers retrench and delay investments. Instead of third-quarter net income of 12 US cents a share, as expected by analysts, Oracle now forecasts net income of 10 US cents a share. Sales of its flagship database software are expected to be flat after earlier prediction of double-digit growth.

The value of stocks in the Silicon Valley company, which helps store and retrieve libraries of information, fell on the opening from $21.38 to $15.73 at one point, the lowest since 1999, wiping away more than $30 billion in market value. The evidence that big companies are cutting computer-related spending dragged the shares of other software-makers lower. In the last month, the value of technology software companies has fallen by 22 per cent and Internet services by 36 per cent. The tech stars of the US 1990s boom are now seeing their stock ratings reduced by the big Wall Street investment houses. Oracle's rating was cut yesterday at Merrill Lynch, Prudential Securities and Goldman Sachs. Credit Suisse First Boston reduced ratings on a dozen other software stocks, including PeopleSoft and Siebel Systems, citing spending cuts. Siebel Systems, a maker of software for managing customer service which employs 80 people in Dublin, fell $6.69, or 15 per cent, to $37.94, while PeopleSoft, a business-software maker that competes with Oracle, slipped $5.27, or 15 per cent, to $28.80. BEA Systems, a maker of electronic-commerce programs, fell $4.98 to $33.94, and Check Point Software Technologies declined $6.97 to $64.34. Federal Reserve chairman Mr Alan Greenspan yesterday denied he was too-slow in cutting rates in January by one point to halt the slowdown, while refusing to give any hint of his plans on further interest rate cuts. "I hope I am sufficiently ambiguous not to indicate when or if" there will be a rate cut, said Mr Greenspan, who is well known for using complex banking language to avoid answering direct questions about fiscal policy - language he himself described yesterday as "Fed-speak". He repeated his belief in testimony before a US Congress banking committee that cutting taxes was a preferred use for the burgeoning federal surpluses.