Oracle’s Earnings Indicate Businesses Still Cautious, Not Yet Ready to Spend
Oracle’s earnings results were lower than expected and its shares are down 21 percent for the year. The news from Oracle prompted a sell-off of shares in other enterprise software companies. Oracle sells expensive and complex systems to businesses, and so its poor performance may indicate that many CEOs aren’t ready to heavily invest in capital expenditures.
December 21 2011 by ChiefExecutive.net
On Tuesday, Oracle released disappointing fiscal second-quarter financial results. Oracle’s numbers were even worse than had been predicted, according to The Wall Street Journal. Since Oracle is a tech giant, it spurred negative buzz about technology and enterprise software companies. Many big names saw their stock prices take a hit.
The following companies saw their shares decline:
- SAP: -6.2%
- IBM: -3.7%
- Salesforce.com: -7.9%
- Tibco Software: -13%
- Citrix Systems: -7%
Because Oracle is a technology leader that sells complex business software, its poor performance may indicate a hesitancy on the part of business owners to invest in their companies. The economy is uncertain and businesses may not want to invest in an uncertain future.
In our CEO Confidence Index survey for December 2011, only 42% of CEOs expected to increase their capital expenditures in 2012 and 70% of those CEOs expected the increase to be by less than 10%. Over 39% expected not to increase their capital expenditures in 2012.
As one CEO said, “We are delaying any expansions. We are struggling to maintain our existing asset base from the onslaught of government intervention.” And another, “We are closely watching our expenses and working hard on maximizing productivity throughout our businesses. No ‘nice to haves’ only ‘have to haves’ in our budget for 2012.”
This sentiment may explain some of Oracle’s issues, but analysts don’t seem to be too worried. The numbers may be Oracle-specific. Time will tell.