Oracle Corporation (NDAQ: ORCL) is seen by many as a barometer for the technology sector and its most recent earnings suggests that a slowdown may be on the horizon. The tech giant reported a 30% jump in profits and a 21% jump in revenues, but sparked concern among investors that its many acquisitions hadn't insulated it from the larger economic crisis facing the United States.
Oracle's revenue projections in particular is what failed to impress the street and ignited concerns about a technology spending cuts. The revenue slowdown can be traced back to a reduction in the number of new licenses for software, which grew only 16% when its projected range was 15% to 25%. This is a closely watched indicator since it shows how much companies are spending to buy new software rather than simply just pay to maintain old software.
Narrowing it down even further, Oracle's weakest spot was the 7% growth in sales of new license for business applications. These are programs used by accounting and human resources divisions when companies embark on new projects or expand their businesses. The slowdown in this particular area told many investors that companies were being a lot more conservative with their money and may cut technology spending.
Many investors had hoped that Oracle's string of acquisitions would insulate the company from any major slowdown, since they brought in many new customers. The moves also diversified the firm to such an extent that just 13% of its revenues came from the troubled financial sector. However, the fact that these acquisitions still did nothing to curb the slowdown is what caused the major reaction in Oracle's stock today.
Oracle also caused ripples across the larger technology sector. The move also comes after networking company
Cisco Systems (NDAQ: CSCO) posted its results that suggested a potentially weaker year for corporate technology spending. And with companies like
Intel Corporation (NDAQ: INTC) and
IBM (NYSE: IBM) reporting earnings within the next week, the sector is on edge with concerns of a slowdown.
In the end, Oracle is the latest in a series of bearish announcements in the tech sector suggesting that spending will begin to slowdown. Investors are slowly realizing that even technology may not be immune to the problems in the financial sector despite a lack of direct exposure. Bad news all around.
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