Merrill Lynch Slashes Tech Sector Rating

Financial services company labels software as "discretionary."

Merrill Lynch, the troubled financial service company, put aside its own sub-prime woes to slash and burn its ratings for the enterprise software sector.

Citing an expectation of low software sales, worries about the overall economic picture and enterprise softwares unusually slow first quarter, Merrill Lynch went on a cutting spree.

Merrill Lynch analysts wrote: "Software spending is a discretionary item that could be trimmed if the U.S. economy were to enter a recession."

The two biggest companies to feel the axe were Microsoft and Oracle. Both lost their "buy" rating. Merrill now rates both as neutral.

Microsoft also got axed because of its "exposure to consumer spending and likely increases in investments related to its online business."

Oracles problems, according to Merrills analysts, are its "exposure to financial services and our concern over its ability to continue beating and raising estimates." In addition, Oracle may be limited by "exposure to financial services and potentially weakening U.S. enterprise spending."

They were far from the only companies to have their ratings chopped. Linux distributor Red Hat and database software vendor Sybase, also got chopped.

Red Hat felt Merrills scorn because of its "its exposure to financial services and additional time for adoption of its RHEL 5 product refresh." Sybases troubles, as Merrill sees it, are its "exposure to financial services and the risk it faces in its normally seasonally strong fourth quarter."


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Merrill also took whacks at Taleo, an employee recruiting and screening software vendor, and Concur Technologies, which makes software that automates business expense reporting.

Except for Oracle, all the companies stocks have gone down slightly during the course of the day.


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