Oracle beats outlook, shrugs off fiscal debate

BOSTON/SAN FRANCISCO Wed Dec 19, 2012 5:28am IST

The company logo is shown at the headquarters of Oracle Corporation in Redwood City, California February 2, 2010. Picture taken February 2, 2010. REUTERS/Robert Galbraith/Files

The company logo is shown at the headquarters of Oracle Corporation in Redwood City, California February 2, 2010. Picture taken February 2, 2010.

Credit: Reuters/Robert Galbraith/Files

Related Topics

BOSTON/SAN FRANCISCO (Reuters) - Technology giant Oracle Corp ORCL.O said software sales growth will stay strong into the new year despite a looming fiscal crisis that investors have worried could cause a slump in IT spending.

Shares of the world's No. 3 software maker rose 2.6 percent after it reported fiscal second-quarter revenue and earnings that surpassed Wall Street forecasts.

Oracle President Safra Catz told investors that businesses were still looking to spend money already allocated to 2012 technology budgets.

"Folks want to close deals," she told analysts on a conference call following the earnings release on Tuesday. There has been "no negative impact on pricing. Pricing remains very good for us."

Oracle said software sales would grow 3 to 13 percent this quarter, which runs through February. It expects fiscal third-quarter hardware products sales to be flat to down 10 percent from a year ago.

The company's software and hardware forecasts were roughly in line with Wall Street expectations, according to FBR Markets analyst Daniel Ives.

Oracle reported that software sales and cloud software subscriptions rose 17 percent from a year earlier to $2.4 billion in its fiscal second quarter ended November 30.

Oracle had forecast that new software sales would climb 5 to 15 percent from a year earlier when it last reported earnings on September 20.

"I would call it an early Christmas present," Ives said. "It's a positive sign for the overall technology sector."

Investors pay close attention to new software sales because they generate high-margin, long-term maintenance contracts and are an important gauge of the company's future profits.

Oracle posted a second-quarter profit, excluding items, of 64 cents per share, beating the average analyst forecast of 61 cents according to Thomson Reuters I/B/E/S.

Jefferies & Co analyst Ross MacMillan said Oracle's results are encouraging for other makers of business software, many of which end their quarter on December 31.

OFF A CLIFF

Some investors have worried that corporations would postpone spending on technology projects because of uncertainty over the year-end deadline for Congress and U.S. President Barack Obama to reach a compromise to thwart an automatic rise in tax rates and government spending cuts.

Failing to reach a deal, economists say, could lead to another U.S. recession. Catz said Oracle's customers are still spending on software.

"What's going on in Washington - I don't know who it's necessarily influencing today. But I can tell you, our customers have been spending money with us even here in December."

On Tuesday, Oracle forecast earnings per share in the current fiscal third quarter of 64 to 68 cents, excluding items. That was about level with an average forecast for 66 cents.

"It tells you that there's still money being spend by enterprises on software. It's not like the world has ground to a halt," MacMillan said.

The picture was not so bright for Oracle's troubled hardware division, which it acquired with its $5.6 billion purchase of Sun Microsystems in January 2010. The division's revenue has fallen every quarter since it closed that deal.

Hardware systems product sales fell 23 percent from a year earlier to $734 million. Oracle had forecast that hardware sales would drop between 8 and 18 percent.

Chief Executive Larry Ellison told analysts he expected hardware systems revenue to start growing in the fiscal fourth quarter which begins March 1.

Oracle shares rose to $33.75 in extended trade after closing at $32.88 on Nasdaq.

(Reporting by Jim Finkle; Additional reporting by Noel Randewich; Editing by Gary Hill and Richard Chang)

FILED UNDER:

REUTERS SHOWCASE

Ten Years On

Ten Years On

10 years on, tsunami warning stumbles at the "last mile".  Full Article 

Exit Polls

Exit Polls

BJP unlikely to form Jammu & Kashmir govt - polls.  Full Article 

Forceful Conversions

Forceful Conversions

BJP distances itself from religious conversions.  Full Article 

Hopeful Dhoni

Hopeful Dhoni

India's new vintage nearly ready, says Dhoni.  Full Article 

Photo

Fund Raising

Flipkart raises $700 million in fresh funding.   Full Article 

Reforms Push

Reforms Push

Modi may order insurance, coal reforms if vote delayed - officials.  Full Article 

Ali Hospitalized

Ali Hospitalized

Boxing great Muhammad Ali hospitalized with pneumonia.  Full Article 

Going International

Going International

Bollywood’s Priyanka Chopra sets sights on American TV.  Full Article 

India This Week

India This Week

Some of our best photos from this week.   Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device   Full Coverage