In news that is troubling for Oracle but worse for lesser players, JMP Securities analyst Patrick Walravens says a slowdown in enterprise-software spending is upon us, and that it figures to crimp Oracle’s earnings.
While we still believe Oracle will outperform the software industry, our due diligence suggests Oracle’s business is slowing along with enterprise software spending.
Walravens’ opinion isn’t based on a crystal ball or gut feelings. JMP recently conducted a survey of 38 businesses spanning a broad cross section of the economy. Approximately 61 percent of respondents said their enterprise software spending would stay at the same level or decrease in 2008.
This survey result is the worst we have had since 2001 and is similar to the result in May 2003, which marked the beginning of a two- to three-year choppy period for Oracle’s business.
If Oracle is about to sail on stormy seas, so will its rivals and smaller players. Their ships, for the most part, aren’t as big or as sturdy as Oracle’s. If JMP is right, Oracle’s share price might suffer a bit, but the company will be well positioned to pick the scraps of the shipwrecks left behind.