Interview: Oracle
>> one of the big story stocks today was xilinx. shares tumbled down 16%. xilinx is the world’s biggest maker of programable semiconducters. it says second quarter sales fell short of estimates as orders in asia dried up. that news sent the company’s shares down again that 16%. you had revenue in the quarter ending september 30 falling as much as 2% from the first quartser. at that rate, sales may be as low as $397 million. that will compare with a forecast from september 7 of at least $405 million. xilinx shares reached a 52-week low as you see now down 23% since the beginning of the year. a shareholder meeting with oracle today. what is the company saying about acquisitions. particularly after missing sales forecasts last quartser on the heels of its peoplesoft and retek buys. paul walravens has a strong buy on the stock. joining us from san francisco to tell us why he likes the shares so much and what happened in that shareholder meeting today. pat, good afternoon.
>> what the most important thing that oracle is say stphg
>> at the shareholder meeting?
>> exactly.
>> it was fairly mundane so basically a lot of question and answer around subjects which people are pretty familiar with such as the dividend which is not something they currently intend to do.
>> why do you think the tone wasn’t a little more aggressive or more intense given that the company missed that sales forecast?
>> i think that’s the reason. when you missed a quarter, slightly better to keep expectations down and do better than they expect rather than risk disappointsing again.
>> in terms of reassurance that you got about that sales miss, what kind of reassurance due hear?
>> for reinsurance what we look for is to look to people in the field, people who are selling or partnered with oracle in the field. basically it’s important for us to understand why they missed. so what we heard is they had a number of sales execution issues in the quarter meaning that things―they reorganized their sales force and those results are something that didn’t click as smoothly as they could have. people we talk to in general feel the demand for what oracle sells is quite good and the year should still be good. as we head through the second, third and fourth quarter, we’ll see results bounce back.
>> i aou have remained with a strong buy on that stock since december of 2003. shares down almost 6% in that period of time how long are you willing to give the stock to come back?
>> well, you know, it’s been up and down. for me the important thing is whether i think the strategy that they’re pursuing makes sense, right. it may take a while for the market to agree with that. there’s a key thing to keep in mind. there’s two approaches. can you grow organicly or through acquisition. organic growth makes the most sense when you have a market that is in its early stages and is growing rapidly which is what software was like in the 1990’s. when a market starts to mature and consolidation starts to make sense, then growth through acquisition is a reasonable strategy and that’s what oracle is doing currently. my personal view is the software market is maturing. and in a maturing market , people want to view with fewer vendors. oracle is trying to be a vendsor who can go to enterprises and say look, we can offer you just about everything you need in one place.
>> given the consolidation, given the acquisition that larry ellison had pursued in the past several years, particularly in the past year, what sales growth target do you have and how has that changed?
>> it’s very difficult on the application side of the business to know what rate the applications are growing at. if you look at database side of the business that’s pure organic growth. they haven’t had meaningful database acquisitions. last year you saw them growing the database in the low to mid teens which is very healthy for a big company. in the first quarter it grew 1% which is obviously not good. if i thought it was going to stay at 1%, i wouldn’t recommend the stock. but i think what you will see is over the next couple of quarters that will bounce back. the database market should grow at a high single digit, 7%, 8%, 9%, 10% growth rate.
>> larry ellison telling bloomberg recently that saffir katz would be his choice for successor. you don’t think that’s the best choice. who would be the best person to replace larry ellison?
>> i think they need to go outside the company. i think that oracle needs to be led by someone who 15 -- is a technologist which is what larry is. the people who you look at as being sort of the immediate potential successors, chuck philips who is a research analyst and is outstanding. he has a financial background. katz, same situation. an investment banker. outstanding financial background. i don’t think that’s what you need to lead the world’s largest enterprise software company. the good news is i don’t think -- >> i thought you completed your thought and we’re out of time so we’ll leave it there. we hope to speak with you soon. thank you for joining us.
>> thank you.
>> pat walravens. overlooked in 1994 for his work in developing game theory further, thomas schelling and robert aumann awarded the nobel prize in economics today. peter cook spoke with the former aoufrt of maryland economist. we have that conversation straight ahead.
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Listen Market briefing -- Ellen (slow)
NYSE --- Deb (fast)
>> welcome back to “after the bell.” i’m ellen braitman. 30 after the hour. let’s recap the day on wall street where there were declines across the board. you had the major indexes extending declines. we saw the dow down 53 points to 10,238. the s&p losing 8 1/2 points. 1,187 there. as for the nasdaq, down 11 points to 2,078. some of the lowest levels in several months for the indexes. more in a moment on the stock trading. but in the meantime, let’s get the after the bell earnings from genentech. the company coming out with 35 cents a share if you exclude items for its third quarter. genentech the second largest biotech company. also stronger than anticipated on the sales front. sales from continuing operations coming in at $1.75 billion. analysts looking for revenue of $1.6 billion. as for a breakdown of the company’s important products, the company said avastin sales in the u.s. were up 78%. herceptin up 70%. raptiva sales up 28%. also the company saying it sees full-year earnings per share growth about 50%. already you have shares up 50% so far this year. analysts mostly optimistic that genentech can go higher still. 21 of 31 analysts recommend investors buy shares. 10 say investors should hold shares. genentech, keep in mind, has had a goal of passing amgen as the top selling karpb treatment by 2010. counting on avastin and herceptin to help reach the goal. back to trading today. we have deborah kostroun standing by at the new york stock exchange. deb, it is columbus day but a very interesting story on the volume front.
>> you know, it really was, ellen. we actually did more volume today than we did on friday. of course, on friday we had the bond market close a little bit early. but today the bond market was closed and so we had 1.638 billion shares traded. volume is something that we’re tracking closely last week because last thursday we saw 2.1 billion shares traded. we also saw heavy volume on last wednesday. 1.9 billion shares. remember, it was on a week where we had the biggest weekly decline in about six months. where you have above average volume in a down market , that signals to traders definitely a lot of interest in this market . certainly in a day like today the market closing on the lowest level of the day. s&p and dow at the lowest level since may on the close on the day. very interesting things we have been looking at and certainly tracking over the past week. as we get back toward tomorrow with the bond market being open, we’ll have to see what interest we do have in the market . we’ll check that action very closely. if you look at what we’re looking at with the market down once again after the declines last week with the dow down about 2.8% or so. you saw bart barnett at morgan keegan saying the market has been beaten up a little bit. he says with energy prices coming back down, the oil services sector really sold off. he said the market is down to some levels we haven’t seen in some months. if we need expectations for the third quarter earnings and need expectations for the fourth quarter, he says he thinks we could see this market moving a little bit higher so at least that is something we’ll look at over here as we are getting into the third quarter earnings season. alcoa kick that off today. a look at lincoln national corp. they agreed to buy jefferson pilot for $7.5 billion. one of the things that they’re hoping they can do is cut 12k% of the company’s combined costs. as you can see, jefferson pilot was up quite a bit, mainly because the price that lincoln is willing to pay is an 11% premium for each share of jefferson pilot and the acquisition will make lincoln the seventh largest u.s. life insurer by premiums. a big story on the day certainly in the auto-related area. delphi coming in filing for bankruptcy. that was the biggest drag in the s&p 500 not only today but for the year. down 96%. back to you.
>> thank you so much. also today, wre following trouble at the futures broker refco. the company said its chairman and c.e.o. philip bennett placed on a leave of absence after an internal review found he owed the company $430 million. he did not previously disclose that the amount was payable by a separate company that he controlled. all of this according to refco’s statement released today. refco plunged down 45% erasing gains made since the i.p.o. of the company two months ago. refco said its financial statement for 2002 through 2005 should no longer be relied on. the resignation of chief financial officer will remain as chief executive. let’s go into a little more detail now. lincoln national agreeing to buy jefferson pilot for about $7.5 billion. the company will pay $55.48 a share in cash and stock for each share of jefferson pilot. it is an 11% premium to the average closing price over the past month. lincoln national expecting the merger will yield annual pretax cost savings of $180 million by the end of 2008. barry diller had tough words about a keycorp rat governance law. the sarbanes-oxley act of 2002 was passed to protect investors from fraudulent accounting by corporations. the chief executive of i.a.c. interactive saying the cost of complying with sarbanes-oxley are hurting companies.
>> the problems that sarbanes was about attacking financial malfeasance as the the top of organizations, not the bottom or middle of organizations. to make those people run around in circles is wasteful and totally non-productive.
>> shares of dillers’ company, i.a.c. interactive, are down this year slumping 18% for 2005. are acquisitions right for oracle, particularly when the company missed sales forecasts last quarter? we take a closer look coming up.
