Analysts worry that something’s amiss at Oracle software maker

BOSTON, Fri Mar 16, 2012 – Oracle Corp. may soon run out of excuses to feed Wall Street.

When the world’s third-largest software maker missed earnings estimates for the first time in a decade back in December, it blamed an unpredictable global economy. It seemed plausible at the time.

But growing evidence suggests the company is suffering due to challenges that have nothing to do with the macro economy: mounting competition from traditional foe SAP, the loss of a key IT partner in Hewlett Packard, and a hardware business that is becoming a thorn in its side.

Analysts have become increasingly worried that the hardware business Oracle acquired in 2010 with its $5.6 billion purchase of Sun Microsystems has turned into a liability, with sales falling short of expectations.

The company’s bread-and-butter database business – Oracle is the world’s biggest maker of database software – may face off against competition from a re-energized SAP before the end of this year. And Oracle’s highly touted new generation of business management software, released in 2011 after years of delays in development, has been slow to take off.

While this is happening in a still-shaky tech-spending environment, Oracle’s rivals do not seem to be feeling the same pinch. SAP, International Business Machines Corp., alesforce.com and VMware recently released relatively strong results and bullish outlooks, causing investors to question whether something is amiss at Oracle.

CEO Larry Ellison will deliver his latest report card on the state of the business on March 20, when Oracle releases quarterly results. An increasingly skeptical crew of Wall Street analysts will be parsing his words and pouring through the numbers for signs of fundamental business problems, regardless of whether the company meets expectations for the period.

“Oracle is a company with some issues right now,” said long-time Oracle watcher Rick Sherlund, a Nomura Securities analyst.

Those issues are reflected in its stock price, which has gained just 3 percent since the company reported quarterly results in December, compared with a 17 percent rise in the Nasdaq Composite Index.

Oracle officials declined to comment for this story.