Oracle's miss sparks Wall St fears of spending cuts

(Reuters) - Oracle Corp shares fell 14 percent on Wednesday, a day after its earnings missed analysts' expectations, dragging down the technology sector as investors feared the rare miss was a sign corporate America may be pulling back on tech spending.

Troubles at the No. 3 software maker follow profit warnings from big tech names including Hewlett-Packard Co, Intel Corp and Texas Instruments Inc. The warnings were not limited to Silicon Valley, with U.S. industrial conglomerate Emerson Electric Co reporting a drop in orders for equipment used in big data centers.

"With all the fear about Europe, and the fact that Oracle had beaten for the previous four quarters ... makes you take a step back," said Daniel Morgan, a portfolio manager at Synovus Securities in Atlanta. "Is this a preliminary example of what we could expect in January from Microsoft and other players? It raises an eyebrow that things may not be as hunky dory as we've been led to believe in terms of IT spending."

Given that Oracle's results were for a quarter that ended in November, they could signal trouble at peers whose quarters end in December, investors reasoned.

"The majority of deals in the fourth quarter are traditionally closed in the last two weeks of the quarter, so the delay of Oracle's deals is a negative cross read for SAP," Silvia Quandt analyst Michael Busse said.

U.S. companies have been sending mixed signals about their spending plans for 2012. A survey released last week by the Business Roundtable found that 16 percent of CEOs of large U.S. companies planned to cut their capital spending over the next six months, up from 13 percent who planned to cut in the third quarter.

But other data released on Wednesday showed U.S. businesses signed up for $6.2 billion in loans, leases and lines of credit to fund capital expenditures in November, a 38 percent increase from the month a year ago, according to data released by the Equipment Leasing and Finance Association on Wednesday.

SHARES TUMBLE

Oracle's stock fell $4.01 to $25.15, the lowest point since August, making it the sixth-biggest decliner on the Nasdaq early Wednesday afternoon.

Other big decliners in the sector including VMWare, down 11.3 percent to $75.65 in the steepest drop on the New York Stock Exchange; NetSuite, down 8.7 percent to $41.06; and SAP AG, whose U.S. listed-shares were down 7.6 percent at $51.41.

Emerson shares fell 6.3 percent to $46.54.

Emerson said that orders for network power equipment - including uninterruptible power supplies and cooling systems for data centers - fell by 5 to 10 percent in the three months ended November 30, citing factors including an uncertain economic outlook.

"Server shipments have slowed noticeably as well, with European economic instability affecting global growth investments," the St. Louis-based company said on Wednesday in a filing with the U.S. Securities and Exchange Commission.

Several brokerages cut their price targets on Oracle's stock.

Societe General downgraded Oracle to "hold" from "buy" and cut its price target to $28 from $32.

"Although Oracle has solid fundamentals, we believe upside potential is currently limited," Societe General analyst Derrick Wood said.

NEW BUSINESS SLOWING DOWN

"We have seen a dramatic deceleration in new business for Salesforce.com and slowing growth from Red Hat recently," J.P. Morgan Securities wrote in a note. "This may be just the beginning of a long list of IT companies that struggle over the next quarter or more."

BofA Merrill Lynch, however, said Oracle was well positioned for the longer term.

"The acquisition of Sun places Oracle as a datacenter player, providing a complete integrated stack of hardware and software," the brokerage wrote in a research note.

"We expect Oracle to gain incremental revenue and cost synergies from the acquisition, resulting in higher EPS potential longer term."

Investors are watching Oracle's hardware division, which it added in 2010 with the acquisition of Sun Microsystems. Second-quarter hardware systems product revenue fell to $953 million, missing the $1.06 billion expected by analysts polled by StreetAccount.

As they set out their 2012 forecasts last week, big U.S. industrial companies including General Electric Co and United Technologies Corp said they were looking for new ways to cut costs in the coming year.

GE, the largest U.S. conglomerate, said it planned to reduce spending by at least 0.5 percentage points of revenue -- or more than $750 million, based on current analysts' estimates -- with a focus on reducing its footprint in Europe.

United Tech also outlined plans to cut costs at its fire and security equipment unit, with a focus on reducing layers of management at a division created through a wave of acquisitions.

(Reporting by Sayantani Ghosh in Bangalore, Marai Sheahan in Frankfurt and Nicola Leske and Nick Zieminski in New York, writing by Scott Malone)