Oracle, Red Hat, Tibco and Adobe this week showed that software sales, especially for products geared for the enterprise, continue to be strong even though economic worries have caused confidence in the tech sector to decline.
Though a dip in Oracle hardware sales last quarter is causing a stir among analysts, the company’s software revenue increased and overall company results were better than expectations.
Oracle’s profit for the quarter ending May 31 jumped 36% to US$3.2 billion, the company announced. Revenue increased 13% from the year-earlier period to $10.8 billion, beating expectations of $10.75 billion.
However, Oracle hardware revenue fell 6% to $1.2 billion. This apparently has some market watchers spooked, as Oracle shares fell Friday afternoon by $1.23 to $31.24. Oracle officials stressed that the decline in hardware sales follows a strategy to get out of the low-end systems business after its acquisition of Sun. Oracle executives said in an earnings conference call that the company plan is to increase sales of systems to which the company can “attach” value-added peripherals and software.
“To grow the top line right, getting rid of these low-margin businesses is key, because we don’t get the attach, there is no aftermarket. And I tell you from a shareholder perspective, that’s valueless revenue,” said Oracle co-President Mark Hurd.
Open-source enterprise software vendor Red Hat also announced strong results. Revenue for the quarter ending May 31 was $264.7 million, an increase of 27% from a year earlier.
“We believe there is a fundamental shift in IT spending, in which cloud computing and virtualisation have become key strategic priorities,” said Red Hat CEO Jim Whitehurst in the company’s earnings release. “We believe that Red Hat is well positioned to capitalise on this growing demand as enterprise customers look to Red Hat when upgrading and modernising their IT infrastructure.”
Red Hat raised its guidance for its second quarter to $272 million in sales and EPS (excluding one-time charges) of $0.24 to $0.25, greater than analyst estimates of $267 million and $0.24, respectively. Red Hat shares declined at the end of the week along with the rest of the market, however. Red Hat shares in afternoon trading Friday were down $0.24, at $25.03.
Another software category leader whose share price slipped despite good results this week was Adobe. Shares were down by $0.42 Friday to $30.01, even though Adobe earlier in the week reported that for the quarter ending June 3, sales increased 9% year over year to $1 billion and income jumped 54% to $229 million.
One of the few tech companies to get respect in the market this week was Tibco. The company announced that sales for the quarter ending May 29 were $216.4 million and net income was $21 million, compared to revenue of $173.3 million and net income of $12.8 million a year earlier.
Despite strong corporate IT sales, especially in the software arena, IT companies on the Nasdaq are down 1.37% for the year, as macroeconomic worries about the job and housing markets appear to focus attention on weak spots in the sector, such as sales of certain hardware and components.
If this week is any indication, not even strong results from enterprise tech vendors will help boost optimism this quarter as long as economic concerns weigh heavy on the sector.