Oracle comes back with bang after 19 months of sluggish performance

Following  a strong forecast of sales next year, Oracle Corp’s shares rose to 4 percent on Wednesday, an increase not seen for about 19 months by the world’s third largest software maker.

Oracle Corp’s success is often the benchmark used by smaller software makers. Analysts said that the 17 percent increase in the company’s software sales is a positive trend for the industry. Several brokerages have raised Oracle’s price targets on the stock because of the recent development.

Investors are keen to take note of the new software sales because they often generate more strategic gains, and are used as a measure of the company’s future profits.

“Oracle delivered strong results in a challenging environment,” said Derrick Wood, a Susquehanna Financial Group analyst in his statement to clients.

Investors are not very optimistic about the readiness of corporations to spend on technology, due to the uncertainty brought about by the yet-unresolved fiscal cliff issue being tackled by the Obama administration and the U.S. Congress.

Shares of Oracle rose to $34.15 on early Wednesday at Nasdaq. The American company competes with Germany’s SAP AG and Inc.

Earlier in the month, Oracle announced that it would give over $800 million back to shareholders as the uncertainty of the  looming fiscal crisis, an automatic increase in tax rates as well as lesser government spending. Oracle is just one of the many other companies  declaring special dividends to shareholders because of the crisis.

“(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,”  said Brad Reback, a Stifel Nicolaus analyst.

Oracle is now slowly embracing cloud computing, an umbrella term to refer to a delivery of computing services through the Internet from remote servers,  to drive growth.

Many corporations prefer cloud computing as it offers simpler implementation and lower maintenance costs than traditional software, which are usually required to be installed on each computer.

Analysts from FBR Capital Market said that next year would be a good one for Oracle because of its strong market share gains, robust product cycle, and its use of cloud computing.

“The only blemish in the quarter was on the hardware front, as the company remains focused on sunsetting uneconomical product offerings,” analysts from FBR said.

Oracle’s hardware division, purchased from Sun Microsystems in January 2010 for about $5.6 billion, is still struggling. The division’s quarterly product sales has fallen to 23 percent compared to its performance last year.

source: reuters

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