Oracle New Software Sales Disappoint

BOSTON (Reuters) – Oracle Corp (ORCL.O: Quote, Profile, Research) posteddisappointing quarterly software sales on Wednesday and saidits customers had become more cautious, quashing the idea thatthe software sector would be immune to the economic turmoilthat has roiled the rest of the tech sector.

Oracle shares fell 8 percent on the news, which also pulleddown the stocks of other software makers like SAP (SAPG.DE: Quote, Profile, Research).

Chief Financial Officer Safra Catz warned that businesseshad delayed approving purchases of Oracle’s software toward theclose of its fiscal third quarter, which ended on Feb 29. Thecompany would likely have a tougher time closing sales thisquarter than it did a year ago, she added.

"Customers got a little more cautious toward the end of thequarter," Catz said on a conference call with analystsfollowing the results.

Oracle’s stock had gained 10 percent in the month leadingup to Wednesday’s fiscal third-quarter earnings report, onexpectations the results would be a bright spot among anincreasingly disappointing flow of corporate results.

"People have turned to the software sector in general assomewhat defensive, but it’s not immune," said Charles DiBona,an analyst at Sanford C. Bernstein & Co who has a "marketperform" rating on Oracle shares.

As Oracle’s fiscal quarter closes a month earlier than thetypical March 31, investors look to it as an indicator of howother software makers will perform.

While profit matched market expectations, Oracle’s sales ofnew software — which investors look to as an indicator offuture financial performance — rose 16 percent, near the lowend of its December forecast of 15 to 25 percent growth.

Sales of new business management software rose 7 percent to$451 million, short of the $553 million that Wall Street wasexpecting according to Brendan Barnicle, an analyst at PacificCrest Securities.

Shares of rival SAP (SAP.N: Quote, Profile, Research), the No. 4 software maker bytotal sales but No. 1 in business management, fell 3.5 percentfollowing the earnings report.

Shares of International Business Machines (IBM.N: Quote, Profile, Research), the No.2 software maker, fell 1 percent after-hours, while No. 1Microsoft Corp (MSFT.O: Quote, Profile, Research) was down less than 1 percent.

BUSINESS MANAGEMENT SOFTWARE

Goldman Sachs analyst Sarah Friar said that Oracle’s salesof business management software, or applications, such asaccounting programs, were particularly disappointing.

"The applications business is definitely very weak. Thatmakes me worry about what software (results of other companies)will look like for the March quarter. I think this isdefinitely going to spook the market," said Friar.

Oracle’s results had previously outperformed expectations.This was the first quarter that it has disappointed Wall Streetsince the economic downturn began.

Net income in the quarter rose 25 percent to $1.34 billion,or 26 cents per share, from $1.03 billion, or 20 cents, a yearearlier, the company said.

Profit excluding items was 30 cents per share, which was inline with Wall Street forecasts. But non-GAAP revenue was $5.37billion, which was lighter than the average analyst forecast of$5.415 billion, according to Reuters Estimates.

New software sales figures are followed because thecustomers also sign maintenance contracts that cost 20 percentof the product price per year. Also, software makers get extrarevenue from customers when they expand the number of workersusing a computer program that they have already purchased.

Oracle shares were down to $19.15, or 8.5 percent, inafter-hours trading after closing at $20.94 on Nasdaq.

(Additional reporting by Philipp Gollner and Tiffany Wu;Editing by Gary Hill, Leslie Gevirtz)