Oracle delivers strong Q1 but hardware slips

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Oracle delivers strong Q1 but hardware slips

Investors unimpressed.

Oracle 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 $US1.67 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 $US8.37 billion in the fiscal first quarter ended August.

This is just a touch ahead of Wall Street's target of $US8.35 billion and up 11.6 percent from $US7.5 billion in the year-ago period.

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

The outlook for worldwide technology spending has darkened after warnings by bellwether technology vendors from Dell to Cisco Systems.

Governments are scaling back purchases to reduce deficits while corporations are tightening budgets to cope with a worsening economic picture.

(Reporting by Sinead Carew in New York and Edwin Chan in Los Angeles; Editing by Richard Chang)


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