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Oracle shares fall on weak 3rd-quarter report

Wednesday - 3/20/2013, 7:40pm  ET

BARBARA ORTUTAY
AP Technology Writer

NEW YORK (AP) -- Oracle Corp. on Wednesday reported flat earnings for its fiscal third-quarter, hurt by a drop in sales of hardware systems and new software. Shares tumbled in after-hours trading on the weaker-than-expected results.

Revenue from new software licenses and online or "cloud" subscriptions, a closely watched figure, fell 2 percent year-over-year to $2.3 billion. The company had predicted that number would rise by 3 percent to 13 percent. Hardware systems revenue dropped 16 percent. But while the hardware revenue decline has been ongoing and expected, the drop in new software licenses and subscriptions was a surprise.

As one of the world's largest makers of business software, Oracle's numbers help Wall Street gauge the direction of corporate technology budgets. When Oracle's earnings are lackluster, it's often a sign that companies are concerned about the economy.

But Oracle also depends on international markets for a major part of its revenue. Europe's economy is still limping amid worries about unwieldy government debts and China's economic growth has been slowing. That said, Forrester analyst Andrew Bartels thinks it will take earnings reports from other technology vendors before it becomes clear whether the problem is Oracle-specific or reflects broader demand. He thinks it's likely both.

He said it was unfortunate that Oracle's quarter included all the worry about the 'fiscal cliff.' December was filled with concern about the automatic tax increases and spending cuts that threatened to drag the U.S. back into a recession until the issues were partially resolved on Jan. 1.

The company also faces the challenge of drumming up demand for Fusion, its new, cloud-based applications business, Bartels said, since many of its customers are content using its older Applications Unlimited program.

Oracle earned $2.5 billion, or 52 cents per share, in the December-February quarter. That compares with $2.5 billion, or 49 cents per share, in the same period a year earlier, when it had more shares outstanding. Adjusted earnings totaled 65 cents per share in the latest quarter.

Revenue fell 1 percent to $8.96 billion from $9.04 billion, hurt in part by the stronger dollar.

Analysts polled by FactSet had expected earnings of 66 cents per share, excluding charges for past acquisitions and other costs, on revenue of $9.38 billion.

Shares of the Redwood City, Calif., company fell $2.56, or 7.2 percent, to $33.20 in after-hours trading following the announcement. The stock had closed the regular session up 8 cents at $35.76 before the report.


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