[Deborah Marchini, Cnn Anchor:] We saw an earnings warning from Oracle after yesterday's closing bell. It's depressing that stock significantly. But the pressure on the Nasdaq futures does seem to be easing. Joining me to talk about Oracle's announcement and to put it into market perspective is Andrew Barrett, technology strategist at Salomon Smith Barney. It's great to have you here again. Thanks so much for coming.
[Andrew Barrett, Salomon Smith Barney:] Thank you, Deb.
[Marchini:] First of all, Oracle's warning. What Oracle says is weakness and information technology spending in the U.S. is to blame, that there's an economic slowdown. If that's the case, presumably not only bad for Oracle, but for a lot of other companies as well.
[Barrett:] Well, this is really no surprise. I mean, we saw this when we saw Sun. And they said there was a dramatic shortfall in the last month of this quarter. And I think that's the important take- away here. Larry Ellison stated last night that the first two months of the quarter were fine. It really fell off a cliff. And this is what we're seeing with a lot of these high-tech companies. Larger corporations that are spending are just putting things on hold saying, Let's see where the economy is going."
[Marchini:] We have got Oracle down four and a half, and the stock closed up yesterday...
[Barrett:] Right.
[Marchini:] ... before the announcement. Oracle is now down four and a half to sixteen and seven eighths in pre-market. Does it look like a buy to you at that price?
[Barrett:] From a valuation level, most of the enterprise software stocks are coming into that historical troughing period where they get them. We can look at companies like Siebel or People Soft in that front. So from a valuation perspective, it looks very attractive. We need to see where the economy is going first before we can back up the truck and say, Let's start buying. Investors want a little more visibility.
[Marchini:] Yes, that's why we saw we just had them on the screen a moment ago. Not only PeopleSoft and Siebel, but BEA Systems and Microsoft got hit after hours as well. You feel it's a little bit too soon then to buy?
[Barrett:] A little bit too soon. It's interesting that Microsoft's being hit, though, because Microsoft's sort of the anti- Oracle and where one is doing well typically at the expense of another. So it's interesting that investors are taking the shares of Microsoft down. That's probably a little unwarranted this morning.
[Marchini:] OK, the last time you were here, you predicted accurately that the Nasdaq would continue to slide. It has really taken a header. What's your prediction now?
[Barrett:] We need to get through pre-announcement season because we're in that season right now. And so the first two weeks in March is when all the companies are going to get all their bad news, their dirty laundry, and lay it out on the table. And it looks like, unless we get Fed intervention some time today, we're not going to get Fed intervention until the 20th of this month. So, I still see a sliding Nasdaq. Probably not meaningfully between now and pre-announcement season. The 20th could be a good time to start to come back into these names, particularly if we get better economic data.
[Marchini:] Do you think this index might go back to 2000 or lower?
[Barrett:] That would be scary.
[Marchini:] Yes.
[Barrett:] That would be scary. I mean, it's it's it's a possibility. We didn't think it would retest new lows, given in January, you started to see the Fed behind it. And it finally would act like a safety net. And clearly given the concerns that we will continue this slowdown throughout the balance of this year, that's what's sending it down. So, it's a possibility. I hope not, but it's a possibility.
[Marchini:] You think nothing short of another Fed rate cut is going to help this sector?
[Barrett:] That's what we need. We'll need a rate cut from Alan Greenspan. We will need a fiscal stimulus from the Bush administration. And that's what we think it's going to take to get the economy back on track.
[Marchini:] All right, the last time you were here, you also had a recommendation on EMC software. You liked the stock. After that it warned, caught a lot of people by surprise because that was the last stock everybody thought would go. How do you feel about it now?
[Barrett:] We had to lower our growth rates slightly in the entire space. We went from 25-percent to 20-percent growth. That's not draconian, and the stock is more than factored into this. Is EMC immune to a slowdown in spending? Of course not. But I think it's going to be a little more insulated than some of the other names in here. I think it's a safe area to go. And I think from a valuation standpoint, this stock very rarely looks good from a valuation standpoint. This is a good core name, and investors should be buying.
[Marchini:] This is a company that's going to be there for a while. We'll just take a longer-term view.
[Barrett:] Absolutely.
[Marchini:] What else are you looking at right now? What else do you think has a sufficiently depressed valuation and decent prospect, even if the economy takes some time to recover?
[Barrett:] Well, what you want to do is you want to focus on big cap. And when you look back at over the last 30 years, the industry that tend to recover first, when we do get a recovery, it tends to be within storage. We talked about EMC and Data Networking. I think Cisco is a big name that we all know. But, hey, it's at a very attractive valuation. Even going so far to say companies like Nortel are fairly well positioned right now. More aggressively, we like the shares of CheckPoint Systems. It makes Internet security software. So when we get the "I Love You" virus and the Anna Kournikova virus, this is the company that's going to come in and help you out with that.
[Marchini:] I'd love to know who you think is going to be the rest virus, but we're out of time. Andrew Barrett Salomon Smith Barney, great to have you here. Thank you.
[Barrett:] Anytime. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com