Oracle software sales miss target

By Jim Finkle and Clare Baldwin

BOSTON/SAN FRANCISCO (Reuters) - Oracle Corp's quarterly software sales came in sharply below expectations, dashing hopes that corporate technology spending is rebounding and sending its shares down 2.7 percent.

New license sales at the world's No. 3 software maker fell 17 percent, steeper than the 4 percent to 14 percent decline that Oracle forecast three months ago.

Oracle's disappointing results released on Wednesday came on the heels of positive outlooks for the industry from No. 1 chipmaker Intel Corp and other technology leaders.

Analysts and technology executives had hoped that corporate spending, which all but collapsed during the downturn of the past year, was on the mend.

JMP Securities analyst Patrick Walravens said budgets for big-ticket technology projects have not started to open up even though consumer sales are improving.

"Just because investor sentiment is improving about the economy, that doesn't mean people are signing purchase orders," he said.

Oracle said that sales of its No. 1-selling database program were weak in Europe and Asia because companies there are not investing in business management software projects.

President Safra Catz said on a conference call that a decline in sales at Germany's SAP AG was hurting Oracle's sales -- because SAP is one of the top resellers

of her company's database.

Investors focus closely on software sales because they are a forward indicator of Oracle's profit. Customers generally sign maintenance contracts when they buy software, which locks in predictable, recurring revenue.

"They are a big company. It's hard for them to get out of the way of macro conditions," said Caris & Co. analyst Curtis Shauger.

WORSENING SITUATION

The disappointing software sales number exacerbated a 2.3 percent decline in the shares during the regular session. They fell another 2.7 percent in after-hours trading.

Total revenue -- which includes software sales as well as fees for maintenance of previously purchase programs -- fell 5 percent to $5.05 billion in Oracle's first quarter ended August 31. That missed analysts' average forecast of $5.24 billion.

Still, the software giant run by billionaire Larry Ellison reported a fiscal first-quarter profit, excluding special items, of 30 cents per share, matching Wall Street expectations according to Reuters Estimates.