By Jim Finkle
BOSTON (Reuters) - Business software maker ORACLE (ORCL.NQ)Corp
The forecast of a drop in new license sales of nil to 10 percent met Wall Street targets and analysts said the No. 3 software maker is keeping costs in line and achieving reasonable sales in the midst of the economic downturn.
"They are managing through this downturn relatively well," said Jeff Gaggin, an analyst with Avian Securities.
Oracle blamed adverse fluctuations in the currency market for much of the expected drop in software sales, saying the strengthening of the U.S. dollar will dent the change in that revenue growth by 8 percentage points.
Cowen & Co analyst Peter Goldmacher said that Oracle's strategy of growing revenue through acquisitions and keeping a tight rein on costs is paying off at a time when other companies are struggling in the recession.
Oracle has spent more than $13 billion over the past three years snapping up other software makers, including BEA Systems, Hyperion Solutions, Siebel and PeopleSoft. That's allowed it to boost sales, diversify its revenue stream and boost margins.
"The way the company has been rebuilt makes it very competitive in a bull market and gives it an exceptionally strong defensive strategy in a bear market," Goldmacher said. "I think you are seeing that play out in what I believe are the early days of a more significant downturn."
The company -- whose rivals include SAP AG
Excluding some items, profit was 34 cents per share, in line with the average forecast of analysts polled by Reuters Estimates.
Second-quarter new software sales, known as license revenue, fell 3 percent from a year earlier to $1.6 billion during Oracle's second quarter ended Nov 30. Wall Street expected $1.66 billion, according to a Reuters poll.
CURRENCY FLUCTUATIONS
Oracle said that the stronger dollar decreased its profit excluding special items by 3 cents per share.
As the dollar rises, the value of foreign sales drops in dollar terms. The Redwood City, California company, depends on international sales for more than half of revenue.
Kim Caughey, a senior analyst with Fort Pitt Capital Group, chided Oracle.
"Why all the chitchat about the strengthening dollar? We realize they are a global firm," she said. "They didn't point out the currency impact as much when it was benefiting them.
In September, Oracle told investors that it expected second-quarter new software sales to rise between 2 percent and 12 percent, assuming a negative currency impact of 3 percentage points.
During the course of the quarter, the euro fell 13.4 percent versus the dollar and the British pound dropped 15.4 percent against the U.S. currency.
Oracle's shares rose to $17.17 in extended trade, after closing at $16.61 during the regular session on Nasdaq.
(Additional reporting by Jennifer Martinez; Editing by Bernard Orr)
