Oracle delivers strong Q1 but hardware slips

Tue Sep 20, 2011 5:17pm EDT

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

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

Credit: Reuters/Robert Galbraith

(Reuters) - Oracle Corp posted solid quarterly results that appeared to defy a weak global technology spending outlook but its weakening hardware sales left investors unimpressed.

Oracle shares rose slightly in late trade after a 1 percent slip in hardware sales offset overall revenue and earnings that beat Wall Street estimates.

"It was fine, not great," said Richard Davis, an analyst at Canaccord Genuity. Software sales were a little better than expected. This is really what you are going to see from a lot of companies out there. Basically the economy is slow but it's not 2008."

New software sales, a gauge of future profit because they generate high-margin long-term service contracts, rose 17 percent compared with analysts' expectations for 15 percent.

Oracle, which competes with SAP in selling software to corporations and public agencies, reports results a month before its rivals -- giving investors a peek at July and August this year -- and is watched for the latest insights into industry trends.

Oracle also sells server computers following its purchase of Sun Microsystems early last year. But hardware sales -- a weak spot in Oracle's otherwise robust set of numbers -- slipped 1 percent to $1.67 billion, lighter than expected as the company sacrificed sales for profitability.

The company run by flamboyant Silicon Valley billionaire Larry Ellison on Tuesday reported revenue of $8.37 billion in the fiscal first quarter ended August. This is just a touch ahead of Wall Street's target of $8.35 billion and up 11.6 percent from $7.50 billion in the year-ago period.

Net income came to $1.84 billion, or 36 cents share, up from $1.35 billion, or 27 cents a share, in the same quarter the year before. Excluding unusual items it earned 48 cents per share compared with analysts' expectations for 46 cents a share, according to Thomson Reuters I/B/E/S.

Margins climbed to 54 percent from 48 percent in the previous quarter.

The company also announced a quarterly cash dividend of 6 cents per share to be paid November 2.

The outlook for worldwide technology spending has darkened after warnings by bellwether technology vendors from Dell Inc to Cisco Systems Inc. Governments are scaling back purchases to reduce deficits while corporations are tightening budgets to cope with a worsening economic picture.

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Comments (2)
avgprsn wrote:
This is where lines get muddled.
Quote:
“The outlook for worldwide technology spending has darkened after warnings by bellwether technology vendors from Dell Inc to Cisco Systems Inc.”
The technology industry is quite a broad term.
Earlier this year people were speaking about the Dotcom 2.0 boom in California and how in a few months investment has over taken the 1999-2000 original bubble…

Stocks are going to take roller coaster rides, otherwise why even wonder on value over time?
To take a few key large players and put the spotlight on the current stock outlook makes very little sense, except to either get investors jittery or excited.

Where is the comparisons with these other companies that “move and shake” just as much?

I’m glad to see Oracle doing well, but really, all in all this industry is meant to evolve at rates that have nothing to do with other comparable markets – there should never be anything static with technology as might be seen in things like commodities.

IE:
As fast as one falls, two more come in from left field to expound on the opportunity. Just look at the Nortel yard sale.

Sep 20, 2011 4:23pm EDT  --  Report as abuse
TerenceLee wrote:
At this point in its life, Oracle has become a dividend rather than growth stock, along with AAPL. I’m selling up, time to find some fresh opportunities.

Sep 20, 2011 5:23pm EDT  --  Report as abuse
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