Reporting a slump in its recently acquired hardware businesses, software giant Oracle (ORCL) on Thursday posted sales for its first fiscal quarter that were lower than most analysts had predicted. But its earnings were in line with Wall Street's expectations.
The company said its sales for the three months ended Aug. 31 totaled $8.18 billion, down about 2 percent from the same period a year ago. Analysts
surveyed by Thomson Reuters on average had expected sales to be $8.4 billion.
However, Oracle's quarterly $2.03 billion profit was up 11 percent from
the first quarter last year. It earned 41 cents a share -- or 53 cents a share, excluding one-time financial items -- which was what the analysts had
predicted.
Given the company's continued growth in software sales and orders for its hardware products, "the business is just extremely strong," President and Chief Financial Officer Safra Catz told analysts during a conference call.
Trip Chowdhry, who tracks Oracle for Global Equities Research, also
voiced enthusiasm about the company.
"What investors need to focus on is, are they losing market share?" he
asked. "Our answer is 'no.' And is their research-and development-pipeline
strong? Yes."
Before announcing its earnings, Oracle -- which also issued a
6-cent-per-share
dividend to shareholders -- saw its stock price drop 52 cents, or nearly
2 percent, to $32.26 at the official close of trading. But its shares gained a
nickel in after-hours trading.
Oracle is one of the world's biggest sellers of business-oriented
database programs and other software. It recently has bought several companies
to bolster its offerings of Web-based software applications to help companies
better manage their businesses. But it has faced growing competition from
other software
firms providing similar services.
In addition, Oracle has had only modest success with its hardware. Those
products consist primarily of server and storage equipment, which it acquired
by buying Sun Microsystems last year in a $7.4 billion deal the companies said
was worth $5.6 billion after accounting for Sun's debt and nearly $2 billion
in cash reserves.
While Oracle's software sales for the first fiscal quarter totaled $5.7
billion, its hardware sales were just $1.35 billion. But analyst Chowdhry said
Oracle has been trying to shed some of the less desirable hardware it obtained
from Sun and that its newer hardware products look promising.
A similar optimistic note was issued this week by Jefferies analyst Ross
MacMillan, who said he has heard of "strong new customer interest" in Oracle's
Exadata product line, which combines hardware and software for
high-performance data processing.
MacMillan added that he expects Oracle to unveil an updated version of
Exadata, which competes against products offered by Hewlett-Packard (HPQ) and
IBM, at the company's Oracle Open World event in San Francisco later this
month.
In recent months, Oracle has been battling with several corporate rivals
in court.
On Aug. 2, German software rival SAP announced it will pay Oracle at
least $426 million in damages and legal fees stemming from allegations that
one of its subsidiaries illegally used Oracle's software.
But Oracle also has had some legal setbacks. On Aug. 1, a Santa Clara
County Superior Court judge ruled that it had violated a contract with
Hewlett-Packard. And in May, a federal jury rejected most of Oracle's claims
that Google (GOOG) had misused its software.
