Oracle shares plummeted Wednesday in German trading after the large software maker missed analysts' profit expectations for the first time in a decade.
The Redwood City, Calif.-based company saw its stock price drop as much as 10 percent on Wednesday after it failed to live up to analyst expectations. The world's second-largest software maker had revenue of $8.81 billion - missing the average estimate of $9.23 billion.
The usually steady Oracle's troubles could be tied to slow economic growth in the United States and the eurozone debt crisis.
The economy got a little harder for them, Pat Walravens, an analyst at JMP Securities in San Francisco, told Bloomberg. In that situation you need to manage your sales force a little more carefully. They were not doing that this quarter.
Oracle's struggles mainly stem from declines in its software maintenance services, usually is one of the most lucrative sources of income for the company. As things become tighter and tighter for companies, more and more high-level executives are getting involved, which slows down the process.
The software management revenue fell to $3.99 billion from $4.02 billion in the first quarter. The drop in revenue in that area is the first since the 2008 Lehman Brothers crisis, according to Reuters, and could be a sign of a downward-heading technology sector.
Tech spending is more under pressure than people thought, Cowen & Co analyst Peter Goldmacher told Reuters. IT budgets have been relatively flat, when you have issues like you do in Europe, people naturally pull back.
Oracle CEO Larry Ellison has tried to deal with a slowed economy by going on a bit of a spending spree. Ellison has spent close to $40 billion on companies that specialize in human resources and management, according to Bloomberg, in order for Oracle to build up its cloud platform.
In October, Oracle unveiled its Public Cloud service, which will run the database software and offer new applications to make things easier for customers. The cloud service hasn't helped with sales yet, but Ellison said in a conference call on Tuesday that the company could see sales growth in the next quarter.
The decline of Oracle this quarter surprised investors, but could end up being one of many such stories, according to one analyst.
Every technology company is going to get hit. This is just the start, Global Equities Research analyst Trip Chowdhry told Reuters.