* New software sales rise 7 percent
* Hardware product revenue tumbles 16 percent
* Shares up 1.5 pct
(Adds analyst comment, updates shares)
By Jim Finkle
BOSTON, March 20 (Reuters) – Oracle Corp (ORCL.O) beat Wall
Street’s earnings estimates as new software sales came in at the
high end of the company’s forecast, offsetting a sharp drop in
hardware revenue.
The software maker’s stock rose 1.5 percent after the news,
in sharp contrast to the sell-off three months ago when its
second-quarter profit missed analysts’ forecasts for the first
time in a decade. [ID:N1E7BJ0CP].
“The software business bounced back,” Citigroup analyst
Walter Pritchard sai. “If you look at where the value is at
Oracle, it would be the software business.”
Oracle estimated that new software sales this quarter will
range from a 2 percent drop to growth of as much as 8 percent,
translating into $3.6 billion to almost $4 billion. The midpoint
of that forecast, of 3 percent growth, is a sharp drop from the
19 percent increase in the fourth quarter of last year.
Yet Oracle Chief Financial Officer Safra Catz suggested on a
conference call that the outlook may not be so grim. She said
she had been “somewhat conservative” in calculating that
forecast.
Still, shares in the company run by billionaire Larry
Ellison pared half of the gains made earlier in the extended
trading session. They had rallied 3 percent shortly after it
posted earnings that beat Wall Street’s lowered expectations.
Catz also estimated revenue from hardware, a persistent weak
spot for the software firm, at $870 million to $980 million.
Some analysts had expected hardware revenue of more than $1
billion as the company turns around the struggling division it
got when it bought Sun Microsystems in 2010.
Q3 RESULTS
Oracle posted profit, excluding items, of 62 cents per share
in its third quarter ended Feb. 29, beating the average forecast
of 56 cents of analysts surveyed by Thomson Reuters I/B/E/S.
Software sales rose 7 percent from a year earlier to $2.4
billion, at the high end of Oracle’s own forecast.
“It’s a pretty significant turn,” said Daniel Genter,
president and chief investment officer of RNC Genter Capital
Management. “The only weak spot was they’re a little low on the
hardware.”
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Oracle, the world’s No. 3 software maker after Microsoft
Corp (MSFT.O) and International Business Machines Corp (IBM.N),
had forecast that new software sales would climb between 0 to 10
percent from a year earlier when it last reported earnings on
Dec. 20.
Investors pay close attention to new software sales because
they generate high-margin, long-term maintenance contracts and
are an important gauge of Oracle’s future profits.
To be sure, the 7 percent growth posted in the third quarter
is lower than in previous periods, which does not bode well for
future earnings, said Kim Forrest, an analyst with Fort Pitt
Capital Group.
“In fiscal 2011 they were in the double digits, and now they
are in the single digits. That’s never a good trend,” she said.
The company also reported on Tuesday that hardware product
sales fell 16 percent to $869 million. It had forecast a decline
of between 5 and 15 percent.
Oracle shares rose to $30.55 in extended trade, after
closing at $30.10 on Nasdaq.
(Reporting By Jim Finkle; Additional reporting by Liana B.
Baker, Nicola Leske, Noel Randewich; Editing by Richard Chang)
((jim.finkle@thomsonreuters.com)(+1 617-856-4344)(Reuters
Messaging: jim.finkle.thomsonreuters.com@reuters.us))
Keywords: ORACLE/
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