Oracle beats outlook, easing "fiscal cliff" worries

Oracle Corp forecast its new software sales would grow 3 to 13 percent this quarter, suggesting the approach of the "fiscal cliff" has yet to crimp corporate spending on technology.

Shares of the world's No. 3 software maker rose 2.6 percent after it reported fiscal second-quarter revenue and earnings that surpassed Wall Street forecasts.

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Oracle President Safra Catz told investors businesses were still looking to spend money already allocated to 2012 technology budgets.

"Folks want to close deals," she told analysts on a conference call following the earnings release on Tuesday. There has been "no negative impact on pricing. Pricing remains very good for us."

The company reported that software sales and cloud software subscriptions rose 17 percent from a year earlier to $2.4 billion in its fiscal second quarter ended November 30.

Oracle had forecast that new software sales would climb 5 to 15 percent from a year earlier when it last reported earnings on September 20.

"I would call it an early Christmas present," FBR Capital Markets analyst Daniel Ives said. "It's a positive sign for the overall technology sector."

Investors pay close attention to new software sales because they generate high-margin, long-term maintenance contracts and are an important gauge of the company's future profits.

Oracle posted a second-quarter profit, excluding items, of 64 cents per share, beating the average analyst forecast of 61 cents according to Thomson Reuters I/B/E/S.

Jefferies & Co analyst Ross MacMillan said Oracle's results are encouraging for other makers of business software, many of which end their quarter on December 31.


Some investors have worried that corporations would postpone spending on technology projects because of uncertainty over the year-end deadline for Congress and U.S. President Barack Obama to reach a compromise to thwart an automatic rise in tax rates and government spending cuts. Failing to avoid this so-called fiscal cliff, economists say, could lead to another U.S. recession.

On Tuesday, Oracle forecast earnings per share in the current fiscal third quarter of 64 to 68 cents, excluding items. That was about level with an average forecast for 66 cents.

"It tells you that there's still money being spend by enterprises on software. It's not like the world has ground to a halt," MacMillan said.

The picture was not so bright for Oracle's troubled hardware division, which it acquired with its $5.6 billion purchase of Sun Microsystems in January 2010. The division's revenue has fallen every quarter since it closed that deal.

Hardware systems product sales fell 23 percent from a year earlier to $734 million. Oracle had forecast that hardware sales would drop between 8 and 18 percent.

Chief Executive Larry Ellison told analysts he expected hardware systems revenue to start growing in the fiscal fourth quarter which begins March 1.

Oracle shares rose to $33.75 in extended trade after closing at $32.88 on Nasdaq.

(Reporting by Jim Finkle; Additional reporting by Noel Randewich; Editing by Gary Hill and Richard Chang)