Oracle, RIM Drag Tech Stocks Lower
Two of Wall Street's technology darlings that had been looked to as beacons to guide the sector out of hard times instead helped pull the market down Thursday.
Both Oracle and Research in Motion posted solid earnings reports after the market close Wednesday, but left investors queasy after saying a challenging road ahead would put pressure on their performance.
Shares for both companies slumped in after-hours trading and took a hit again Thursday. RIM shares were down 13.26 percent while Oracle fell 5.01 percent.
"I don't think either of their earnings were that bad," said David Rovelli, head of US equity trading for Canaccord Adams. "But this is an environment where people just want to know what have you done for me lately."
Rovelli said RIM set a high bar which it failed to reach.
RIM reported a higher quarterly profit of $482.5 million, or 84 cents a share, which missed analyst expectations by 1 cent. At the same time, the Blackberry maker said it expects sales of $2.55 billion to $2.65 billion, or between 84 cents and 89 cents a share, in the second quarter, which were lower than what analysts had hoped.
The company is launching six new phones and anticipating associated costs, but Rovelli said Canaccord Adams has RIM rated as a "buy," particularly because of the expected sharp pullback in shares that have risen about 20 percent since April.
Oracle, meanwhile, also put up big numbers for the quarter, with the software company seeing a 27 percent in profit as sales of new software beat expectations. But it warned that a softening economy could hurt growth as deals are taking longer to complete under intense customer scrutiny.
"We can't predict the economy from one quarter to the next," Chief Financial Officer Safra Catz said.
But as in the case of RIM, analysts are seeing any substantial pullback in Oracle shares as a buying opportunity.
"There are times to be a trader and there are times to invest," Goldman Sachs analyst Sarah Friar said. "Oracle is a stock I want to invest in."
Nevertheless, futures traders braced for a bad day on Thursday as they pointed to a sharply lower opening for all three indexes.
Rovelli blamed the dour look on widespread pessimism for stocks in general.
"It's a horrible environment, a lot of negative energy," he said. "It's not going to be a fun summer. There's low volume, the Fed's not going to do anything because of the election, there's no catalyst, and we're just adrift in nowhere land."
-- Reuters contributed to this report.