Oracle's hardware sales drop

Oracle Corp posted disappointing quarterly results particularly in hardware sales, sparking concerns about a sharper-than-expected slowdown in tech spending and sending its shares down 6%.

Oracle's earnings came on the same day Micron Technology reported quarterly revenue below expectations, and the combination raised fears about how well the technology sector is holding up in the face of shaky economies, especially in Europe.

Tech investors pay attention to Oracle's earnings as its fiscal quarters are out of sync with most others and it is the first to give a glimpse of business conditions in the most recent months, in this case April and May.

Trip Chowdhry, an analyst with Global Equities Research, said Oracle's results suggest spending on technology has slowed down. "Any company that is in technology is going to get impacted," he said.

While Oracle's quarterly profit, excluding items, rose to 75 cents a share and surpassed expectations by nearly 6%, investors had hoped for a more impressive beat. Over the past six quarters Oracle has exceeded profit estimates by an average of 10%.

"Traditionally, in the fourth quarter they usually beat by a huge margin. This time they just managed just to beat," Chowdhry added.

Its fiscal fourth quarter revenue rose 13% from a year earlier to USD 10.8 billion, in line with the average analyst forecast of USD 10.75 billion.

The world's No. 3 software maker reported that fourth-quarter new software sales rose 19% from a year earlier to USD 3.7 billion. That beat its own forecasts of 4% to 14% growth. New sales, it said, should be up 10% to 20% in the first quarter.

Yet sales in its hardware division, which it acquired with its purchase of Sun Microsystems, dropped 6% to USD 1.2 billion.

"The story is the software side was decent, the licensing was decent but the hardware was disappointing," said Kevin Caron, a market strategist with Stifel, Nicolaus & Co.

During a conference call after the earnings release, analysts grilled Oracle executives on the drop in hardware sales.

President Safra Catz said that they fell because Oracle had walked away from deals that would have been unprofitable. "We'd just just rather make money than make revenue," Catz said, adding with a sarcastic tone, "We're funny that way."

Oracle said it expected first quarter hardware revenue to be in the range of down 5% to up 5%.

Oracle shares fell 4% to USD 31.15 in extended trade, down from their Nasdaq close of USD 32.46.

They were down more than 6% prior to the conference call, during which the company issued its first-quarter forecasts.

It said it expects to post first quarter profit, excluding items, of 45 cents to 48 cents per share, in line with the average analyst forecast of 46 cents.

The company also forecast that non-GAAP revenue will rise between 9%-12% from a year earlier to between USD 8.3 billion and USD 8.5 billion. Analysts were expecting revenue of USD 8.3 billion.