Oracle Profit Eases Fiscal-Cliff Worries about Spending

Tuesday, 18 Dec 2012 05:46 PM

 

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Oracle Corp.'s quarterly profit beat Wall Street expectations on strong software sales growth, suggesting that the approach of the "fiscal cliff" has yet to crimp corporate spending on technology.

Shares of the world's No. 3 software maker rose on the news Tuesday.

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

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

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

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 that Oracle's results are encouraging for other makers of business software, many of which end their quarter on Dec. 31.

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 that economists say could lead to another U.S. recession.

"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.

In extended trading Tuesday,Oracle shares rose 2 percent to $33.50, after gaining 1.7 percent in regular Nasdaq trading.

© 2014 Thomson/Reuters. All rights reserved.

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