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Oracle Stock Stable After Big Drop

December 10, 1997

NEW YORK (AP) _ Oracle Corp. stock tumbled by almost a third Tuesday but stabilized in early trading Wednesday. Tuesday was the busiest trading day ever for an individual stock as investors began to worry the database software maker’s biggest growth days are over.

As of 10 a.m. EST Wednesday, Oracle was up 1/8 to 23 1/16 with Nasdaq-leading volume of 17,456,300 shares. On Tuesday Oracle plunged 9 7/16, or 29 percent, to close at 22 15/16 on the Nasdaq Stock Market _ slicing more than $9 billion from the company’s total market value. A whopping 172 million shares changed hands, making it the most actively traded issue in history.

The selloff spilled over into other technology shares and tainted what would otherwise have been an uneventful day on Wall Street.

The problems began after the stock market closed Monday, when Oracle reported second-quarter earnings rose just 4 percent from a year ago because of economic turmoil in Asia and the strength of the dollar. A strong dollar makes U.S. goods more expensive in overseas markets.

The disappointing report was a jolt to investors accustomed to much higher growth rates and earnings that easily beat Wall Street’s estimates. A slew of investment firms added to the woes Tuesday morning by downgrading their ratings on the company.

``Oracle has been a real technology market bellwether, just a real steady performer over the last five years,″ said James Pickrel, an analyst at Hambrecht & Quist in San Francisco. ``The fact that they came up with a shortfall this quarter is very big news.″

Oracle’s frenetic trading day eclipsed the previous record set by Comparator Systems Corp., which had volume of 152 million shares on May 6, 1996, on the Nasdaq Stock Market, after it touted a new fingerprint-identification device.

But Comparator’s shares traded then for just over $1, making the dollar value of its volume much less than Oracle’s. Comparator was later sued for fraud by the Securities and Exchange Commission and settled the suit without admitting wrongdoing.

The volume record on the New York Stock Exchange was set by Occidental Petroleum Corp., with 103.8 million shares on June 17, 1988.

Oracle is the world’s biggest provider of database software, which helps companies handle complex tasks like billing or customer service. It had an estimated 53 percent of the market last year and annual sales of about $6 billion.

It is also the second biggest software company overall behind Microsoft Corp.

But analysts say Oracle’s success in grabbing market share may pose a problem for the company as its tries to keep growing. They say industries such as telecommunications are nearly saturated with Oracle products, meaning it will have to come up with new ways to grow.

``It’s not just a one-quarter impact. The earnings growth rate for the company looks limited for the next several quarters,″ said Pickrel, who lowered his earnings estimates for the next six quarters _ all the way through the spring of 1999.

Pickrel said Oracle is more vulnerable to Asia’s economic problems than other software companies, since a relatively high 15 percent of its sales come from the region.

He speculated that Oracle had a number of deals with Japanese customers that didn’t close before the end of the quarter.

In recent years, Oracle has tried to diversify by selling applications, such as spreadsheets and accounting software, to be used with its underlying database software.

But that portion of the business grew at only a 7 percent rate in the latest quarter _ well below estimates.

Another concern for Oracle-watchers is Microsoft, which will soon introduce a new database software targeting high-end users _ a segment now dominated by Oracle.

``Microsoft is expected to be a serious long-term competitor in the database market, but its presence hasn’t really been felt yet in the heart of Oracle’s business,″ said analyst Richard Sherlund of Goldman Sachs.