SEATTLE Oracle Corp Chief Executive Larry Ellison is expected to present his new co-president, former Hewlett-Packard CEO Mark Hurd, to investors on Thursday as the world's third largest software company reports what analysts believe will be a solid increase in earnings in the face of a faltering recovery in technology spending.
Ellison, who hired Hurd after Hurd left HP under a cloud of scandal last month, could also detail what his old friend is expected to do at Oracle, as the company integrates its acquisition of hardware-maker Sun Microsystems.
Hurd himself also will get the first chance to talk directly to Oracle investors, despite HP's attempts to block his move on the grounds that he will spill its trade secrets.
"The odds are pretty good that Hurd will make some kind of comment on the call," said Richard Williams, an analyst at New Jersey-based Cross Research, who thinks the move for Hurd was a boost for Oracle.
"His talent will be very useful in taking the Sun acquisition and driving value there. That whole Sun strategy is going to drive major change throughout the top 10 or 20 tech companies," said Williams.
Oracle, which competes with SAP AG and International Business Machines with its business software and database products, also is vying with equipment makers such as HP after the Sun deal, as it looks to combine its hardware and software offerings.
By producing the full "stack" of products and services for its customers, Oracle is trying to snag a larger share of technology spending, which looked firmly on the road to recovery three months ago, but now seems to be in question.
"Business is a little better, but there are weak spots that are showing up in various places," said Williams.
FOCUS ON FORECAST
For the quarter ended August 31 -- which is the first quarter in Oracle's fiscal 2011 -- Wall Street is expecting earnings of 37 cents per share, excluding some items, on average. That is up from 30 cents in the year-ago quarter, according to Thomson Reuters I/B/E/S.
Sales are expected to rise to $7.3 billion, from $5 billion last year, when Oracle was hard-hit by companies shying away from spending on big tech projects. The former Sun hardware business, reporting only its second full quarter as part of Oracle, is expected to contribute about $1 billion in revenue.
Investors will be most closely watching the company's forecast -- usually made in a conference call after the earnings announcement -- for growth in new software sales, which are seen as the key indicator of Oracle's financial prospects as they generate long-term recurring maintenance revenues.
Three months ago, Oracle president Safra Catz forecast new software sales would rise 2 percent to 12 percent, citing strong business across the board.
Analysts generally expect Oracle to hit the high end of that forecast, but as fears of economic weakness return -- especially in Europe, where Oracle has many customers -- the forecast for the current quarter could be less optimistic.
"In the (fiscal) fourth quarter, they were pretty darn bullish," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "I'm just looking for what they think will happen in this quarter."
The fact that Oracle is the first big tech company to report numbers from August makes them a bellwether for others in the sector, which has already seen the outlook for tech spending darken considerably in the last three months.
In August, Cisco Systems Inc gave a weaker-than-expected revenue forecast and CEO John Chambers spoke of "unusual uncertainty" in the economy, raising fears of a "double dip" in technology spending.
Last week chip makers National Semiconductor Corp and Texas Instruments Inc cited weak demand for personal computers and other devices that use microchips.
Intel Corp, the leading PC chipmaker, also warned last month that third-quarter revenue could fall short of its own estimates by more than $1 billion, reinforcing doubts about the strength of a technology sector recovery.
(Reporting by Bill Rigby; editing by Carol Bishopric)