Tuesday, June 23, 2009

Oracle Record Profit Margin Beats Forecast

. Tuesday, June 23, 2009

By stockOzone team

Oracle Corp (ORCL.O) reported quarterly earnings above expectations as the No. 3 software maker's profit margin hit a record thanks to robust growth in its maintenance business, sending shares up 2.7 percent.

The company run by billionaire Larry Ellison also reported a smaller-than-expected drop in new software sales and said it grabbed market share from SAP in certain segments -- signs that Oracle may be weathering the downturn better than rivals.

"We've been able to push through the economic situation rather well and I have to tell you that I still see the pipeline growing rather significantly," Oracle President Safra Catz said in a conference call.

Oracle's quarterly results and outlook beat expectations it set in March, when executives warned the recession and strong dollar would take a substantial bite out of profits. Since then, the economy has stabilized and the currency has weakened, setting Oracle up to beat those conservative estimates.

Oracle executives were more optimistic on Tuesday, saying customers are telling the company they need to move forward in implementing new projects to keep their businesses running.

Ellison cited customers as saying they want to spend more in the second half, but he added that remained to be seen.

Morgan Stanley analyst Adam Holt believed Oracle was taking customers away from German rival SAP AG (SAPG.DE) in the market for business management software as well as boosting share in its database business, where it competes with IBM (IBM.N) and Microsoft Corp (MSFT.O).

"If they are able to gain share through the downturn then they will have stronger customer relationships as the economy improves," Holt said.

New software sales, a closely watched revenue measure, fell 13 percent to $2.7 billion. Analysts had been expecting them to slide about 18 percent.

Oracle's shares rose to $20.41 in extended trading. They had fallen 0.5 percent to $19.87 on the Nasdaq.

Disclosure: Author does not own any of the stocks discussed here.

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