Oracle results beat forecasts, plans dividend

BOSTON (Reuters) - Business software maker ORACLE (ORCL.NQ)Corp said it would pay its first ever quarterly dividend, as it reported stronger-than-expected results because of market share gains and cost cuts.

The news sent Oracle's shares up 7 percent in after-hours trade on Wednesday, reflecting the resilience of the world's No. 3 software maker even in the face of a rough economy and currency headwinds.

While Oracle's outlook for the current quarter was cautious, it reported a smaller-than-expected decline in new software sales, which dropped 6 percent to $1.5 billion. Analysts had expected a decline of about 12 percent.

The maker of business management programs and computer databases, which counts many of the world's largest corporations among its customers, also reported a record third-quarter operating margin of 36 percent.

"They beat on just about every metric," said JMP Securities analyst Patrick Walravens, who has a "market perform" rating on the stock. Neither Walravens nor his firm holds shares in Oracle.

Cowen & Co analyst Peter Goldmacher said it looks like Oracle is gaining share in all key markets. Rivals include IBM , Microsoft Corp , SAP AG and Salesforce.com Inc.

While Oracle is sometimes seen as a bellwether for the technology sector because its quarter ends a month before most tech companies, Goldmacher said he believes peers are unlikely to perform as well in the current quarter.

"I would be wary of reading this through to mean that tech is back," he said.

FORECASTS

Oracle posted profit, excluding special items, of 35 cents per share for its fiscal third quarter ended February 28, beating the average analyst forecast of 32 cents, according to Reuters Estimates.

Revenue rose 2 percent to $5.5 billion. The average Wall Street estimate was $5.4 billion.

The company issued forecasts for the fiscal fourth quarter that President Safra Catz said assume its sales team will be able to close fewer deals in their pipeline than they typically do in the last period of the year, blaming the weak economy.

She also said the stronger U.S. currency will take a bite out of revenues and profit because it reduces the dollar value of sales in foreign currencies.

Catz forecast per-share earnings excluding items of 42 cents to 46 cents, which assumes that currency fluctuations will hurt profit by 7 cents per share. Analysts expect the company to post profit of 45 cents per share.

The company also expects fourth-quarter new software sales to drop 17 percent to 27 percent from a year earlier, assuming that currency will hurt growth by 12 percentage points.

Cowen's Goldmacher said that while the forecast is gloomy, he believes Oracle is better positioned than other tech companies. "I think Oracle is the best horse in the glue factory, but tech spending is still under pressure," he said.

Oracle said it would pay a dividend of 5 cents per share, or 20 cents annually, its first such payment to shareholders since the company went public in March 1986.

Third-quarter net income fell 1 percent to $1.33 billion, or 26 cents per share, from $1.34 billion, or 26 cents, a year earlier.

The drop in new software sales was offset by an 11 percent increase in fees that Oracle collects for maintenance for programs it has previously sold to clients. It generally charges them an annual fee of 22 percent of the software's original cost for help-desk service, patches, bug fixes and upgrades to new versions of its programs.

Shares in Redwood City, California-based Oracle rose to $16.95 in extended trade from their Nasdaq close of $15.83.

(Editing by Carol Bishopric, Phil Berlowitz)