<BREAKFAST WITH THE FOOL>
Wednesday, June 16, 1999
"While we are postponing, life speeds by." -- Seneca
Oracle's Q4 Surprises Street
As the Year 2000 "deadline" creeps ever closer, many software companies are bracing themselves for what they believe will be -- if they aren't experiencing it already -- a sharp downturn in sales while their clients scurry around and make sure their systems are ready for the changeover to three zeroes.
But in light of database software firm Oracle Corp.'s (Nasdaq: ORCL) news last night of fiscal fourth-quarter earnings of $0.36 per share, $0.04 better than Wall Street's consensus estimate, some of those fears may be easing. A database software sales boost of 25% for the quarter surprised analysts by several points.
Q4 is typically Oracle's big quarter, but after a Q3 in which license sales posted a lower-than-expected increase, many were expecting further disappointing news from Oracle to close out the fiscal year.
"Oracle's applications software license growth rate of 28% is especially impressive when you consider the following two facts," said Oracle CEO Larry Ellison. "Y2K is just around the corner. And every other ERP [enterprise resource planning] vendor -- SAP (NYSE: SAP), Peoplesoft (Nasdaq: PSFT), BAAN (Nasdaq: BAANF) and J.D. Edwards (Nasdaq: JDEC) -- has reported declines of software sales in their most recent quarter. Furthermore, our [customer response management] software business grew so fast in the fourth quarter that we passed all but one of our CRM [customer relationship management] competitors."
In unrelated Year 2000 news, the U.S. Senate yesterday approved a measure to reduce the legal liability for companies that took steps to prepare themselves for any technical problems related to the changeover in an attempt to prevent a rush of lawsuits.
News To Go
Venerable auction house Sotheby's (NYSE: BID) and decidedly unvenerable online retailer Amazon.com (Nasdaq: AMZN) signed a 10-year agreement to create a joint online auction site. The new site is expected to launch later this year. In connection with the deal, Amazon.com agreed to buy 1 million shares of Sotheby's stock for $35.44 each and, for $10 million, three-year warrants to buy 1 million more shares for $100 each.
Drug developer Pharmacia & Upjohn (NYSE: PNU) agreed to buy biopharmaceutical company Sugen Inc. (Nasdaq: SUGN) in a stock swap valued at approximately $640 million. Sugen shareholders are expected to receive $31 worth of Pharmacia & Upjohn stock for each of their company's stubs, representing a 38% premium to yesterday's closing price.
Electronics manufacturing services (EMS) provider Jabil Circuit (NYSE: JBL) said after the bell last night that its fiscal Q4 earnings and revenues may come in as much as 10% below analysts' expectations due to potential deferments from last-minute design delays on new products from two clients.
Micropositioning and precision optical products supplier Axsys Technologies (Nasdaq: AXYS) called off its search for a buyer after discussions with a number of potentially interested parties. According to Chairman Stephen Bershad, "given the softness in certain of our important markets, a sale of the company is not in the best interests of shareholders at this time."
Business diagramming and technical drawing software maker Visio Corp. (Nasdaq: VSIO) will replace insurance and reinsurance company NAC Re Corp. (NYSE: NRC) on Standard & Poor's Smallcap 600 Index after the close of trading June 18. NAC is being bought by XL Capital Ltd. (NYSE: XL).
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