Boston - Oracle beat Wall Street's earnings estimates as new software sales came in at the high end of the company's forecast, offsetting a sharp drop in hardware revenue.
The software maker's stock rose 2.6 percent after the news, in sharp contrast to the sell-off three months ago when its second-quarter profit missed analysts' forecasts for the first time in a decade.
Oracle posted profit, excluding items, of 62 cents per share in its third quarter ended February 29, beating the average forecast of 56 cents of analysts surveyed by Thomson Reuters I/B/E/S.
“It's a pretty significant turn,” said Daniel Genter, president and chief investment officer of RNC Genter Capital Management. “The only weak spot was they're a little low on the hardware.”
Software sales rose seven percent from a year earlier to $2.4-billion, at the high end of Oracle's own forecast.
Oracle, the world's No. 3 software maker after Microsoft and International Business Machines, had forecast that new software sales would climb between zero to 10 percent from a year earlier when it last reported earnings on December 20.
Investors pay close attention to new software sales because they generate high-margin, long-term maintenance contracts and are an important gauge of Oracle's future profits.
To be sure, the seven percent growth posted in the third quarter is lower than in previous periods, which does not bode well for future earnings, said Kim Forrest, an analyst with Fort Pitt Capital Group.
“In fiscal 2011 they were in the double digits, and now they are in the single digits. That's never a good trend,” she said.
The company also reported on Tuesday that hardware product sales fell 16 percent to $869-million. It had forecast a decline of between five and 15 percent.
Oracle shares rose to $30.89 in extended trade from their Nasdaq close of $30.10. - Reuters