Oracle falls as slow tech spending hurts business

(Reuters) - Shares of Oracle Corp (ORCL.O) dropped 10 percent in pre-market trade on Wednesday, a day after the world's No. 3 software maker's weak quarterly results and disappointing outlook stoked renewed fears of a slowdown in global tech spending.

The usually resilient and upbeat company missed expectations after a decade and joined some of Wall Street's biggest technology names, including Hewlett-Packard Co (HPQ.N), Intel Corp (INTC.O) and Texas Instruments TXN.N, that have warned of worsening business conditions.

Shares of several tech companies were down in pre-market trading, including those of Oracle's rivals Salesforce.com (CRM.N) that fell more than 3 percent to $100.80, and IBM (IBM.N), which was down 2 percent at $183.69.

Hewlett-Packard, Dell Inc (DELL.O), Cisco Systems Inc (CSCO.O) and Microsoft Corp (MSFT.O) were all trading down about 1 percent each. Intel was also down modestly.

"We think most of the weakness was the result of (a)lengthening sales cycles and additional deal scrutiny by customers and currency turning into a headwind," FBR Capital Markets said in a research note to clients.

The brokerage, however, said Oracle was a good defensive stock because of its high recurring revenue base, reasonable valuation, and the fact that expectations have been lowered.

It cut its price target on the company's stock by $4 to $38, but maintained its "outperform" rating.

Canaccord Genuity lowered its rating to "hold" from "buy," and said it does not expect Oracle's shares to grow much for the next two-three quarters.

The company's stock has lost a fifth of its value since touching a 9-year high in May, and trades roughly 12 times forward earnings, a whopping discount to the sector average of about 56.

BofA Merrill Lynch also said Oracle was well positioned for the longer term, given its strong sales execution and an integrated stack of hardware and software.

Investors are keenly watching Oracle's flagging hardware division, which it added with the Sun Microsystems buy in 2010.

Second-quarter hardware systems product revenue fell to $953 million, missing the $1.06 billion forecast of analysts polled by StreetAccount.

Oracle's shares were trading down at $26.18 before the bell. They closed at $29.17 on Tuesday on Nasdaq.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das, Roshni Menon)