Oracle Sounds Another Warning Bell for Tech Sector

I wrote last week about ominous earnings warnings from top companies like Intel
(Nasdaq: INTC ), Texas Instruments (NYSE: TXN ) and Altera (NASDAQ: ALTR ). It
appeared that retrenchment in the U.S. and Europe was starting to take a toll.
My conclusion was: "If the deterioration continues, many top multinational
companies could be vulnerable to price declines." This week we got further
confirmation of the weakness, with a lackluster fourth-quarter forecast from Red
Hat (NYSE: RHT ). Yet it was Oracle's (Nasdaq: ORCL ) earnings report that was
really scary. It's rare for Oracle to miss Wall Street expectations. As a
result, Oracle's stock is off a grueling 13% in Wednesday trading, which is
its worst drop since 2002 another time when the global economy was slowing
down. For the most part, Oracle has seen a delay in purchasing from its
customers. And this seems fairly reasonable how many CEOs are really confident
about 2012? In light of the uncertainty, it's easy to hold back on information
technology spending. Excluding certain items like security software, there
aren't many "must-have" software applications. Since Oracle sells
globally, it's a good barometer of the overall business software market. In
other words, this likely means weakness for other major players like IBM (NYSE:
IBM ), SAP (NYSE: SAP ) and Microsoft (Nasdaq: MSFT ). But the weakness could
even extend to the high-fliers in cloud computing, which focuses on delivering
software via the Internet. Just look at Salesforce.com (NYSE: CRM ), which is
down 9% in Wednesday's trading and is down 40% since July. It's an
increasingly good idea for investors to be cautious with tech stocks. The risks
are becoming substantial. Tom Taulli runs the InvestorPlace blog " IPOPlaybook
," a site dedicated to the hottest news and rumors about initial public
offerings. He is also the author of "All About Short Selling" and "All
About Commodities." Follow him on Twitter at @ttaulli . As of this writing, he
did not own a position in any of the aforementioned stocks.