Investing.com -- Shares of Oracle Corporation (NYSE:ORCL) fell 2.4% following a Bloomberg report that the US Department of Defense (DoD) will terminate its plan to use the company’s software for managing its civilian workforce. This decision is part of the Pentagon’s broader cost-cutting efforts aimed at streamlining operations and reducing budget overruns.
The Defense Department’s initiative, which originally selected Oracle’s cloud HR software in 2019 to manage approximately 900,000 civilian employees, has been deemed inefficient in terms of cost and time. Defense Secretary Pete Hegseth cited the program’s significant delays and budget excesses as key reasons for its cancellation.
The project, which also involved Leidos Holdings Inc. (NYSE:LDOS) for services and support, was six years behind schedule and over $280 million over budget.
Leidos Holdings shares also experienced a downturn, dropping 3.6%, reflecting concerns over the lost potential revenue from the project, which was valued at around $75 million. Similarly, Palantir Technologies (NYSE:NASDAQ:PLTR) saw its stock decrease by 1.7%, as investors feared the company’s defense contracts becoming jeaporadized in turn.
The Defense Secretary’s memo, released last week, emphasized the need for a new plan to be developed within 60 days to achieve the original goal of modernizing the Pentagon’s legacy human resources information technology systems. This abrupt shift away from the current Oracle software project underscores the DoD’s commitment to fiscal responsibility and effective resource management.
Investors reacted to the news by adjusting their positions in Oracle, Leidos, and Palantir, leading to the observed stock price movements. The termination of the Oracle project by the Pentagon is a significant development, as it not only affects the involved companies’ potential future earnings but also signals a possible change in how the DoD approaches large-scale IT projects.
As the DoD seeks to formulate a new strategy for its HR technology operations, the affected companies will likely reassess their engagements with government contracts and the implications for their business models going forward.
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