Oracle shares buoyed by strong software sales
Healthy sales push Oracle shares to 19-month high.
Tech giant Oracle's shared rose by four per cent to their highest in 19 months today after it forecast strong sales for next year, prompting several brokerages to raise their price targets on the stock.
The company's results often set the tone for smaller software makers, and analysts said the 17 per cent jump in its quarterly software sales boded well for the industry.
Investors pay close attention to new software sales as they generate high-margin, long-term maintenance contracts and are an important gauge of a company's future profits.
"Oracle delivered strong results in a challenging environment," Susquehanna Financial Group analyst Derrick Wood said in a note to clients.
Investors are worried that corporations would postpone spending on technology because of uncertainty over the year-end deadline for Congress and US President Barack Obama to reach a compromise on the looming "fiscal cliff", an automatic rise in tax rates and government spending cuts next year.
Shares of Oracle, which competes with Germany's SAP AG and Salesforce.com, rose to $34.15 in early Wednesday trading on the Nasdaq.
Oracle said earlier this month it would give over $800 million back to shareholders, joining a rising number of companies accelerating dividend payments or declaring special dividends because of uncertainty surrounding the US government's fiscal plans.
"(Oracle's) investments and efforts to build out its product portfolio and sales capacity are clearly starting to pay off handsomely and enable it to navigate the rough seas," Stifel Nicolaus analyst Brad Reback said.
Reback, who has a "buy" rating on the stock, raised his price target by $1 to $38.
Oracle, which was slow to embrace cloud computing - a broad term referring to the delivery of computer services via the Internet from remote data centers - is now trying to drive growth by promoting its suite of cloud computing products.
Corporate technology buyers like the approach because it is faster to implement and has lower upfront costs than traditional software, which businesses need to install on their own computer systems.
"Calendar 2013 is promising for Oracle thanks to a strong product cycle, market share gains, and healthy secular trends for cloud spend," FBR Capital Markets analysts said.
The brokerage, which has an "outperform" rating on the company's stock, raised its price target by $1 to $37.
"The only blemish in the quarter was on the hardware front, as the company remains focused on sunsetting uneconomical product offerings," FBR said.
he company's hardware business, which it acquired with its $5.6 billion purchase of Sun Microsystems in January 2010, continued to be sluggish, and quarterly hardware systems product sales fell 23 per cent from a year earlier.