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Oracle's 3Q numbers provide gauge on global tech spending

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POSTED March 18, 2013 10:25 p.m.

REFDWOOD CITY (AP) — Oracle's latest quarterly earnings report provide insights into whether the U.S. economy's recent employment gains have been spurring more corporate spending on technology.

The results, due out after the stock market closes Wednesday, will give the most extensive look at this year's technology spending patterns so far. Oracle Corp.'s fiscal third quarter spans December through February.

As one of the world's largest makers of business software, Oracle's numbers help Wall Street gauge the direction of corporate technology budgets. When Oracle's earnings are lackluster, it's often a signal that companies are concerned about the economy. Solid growth at Oracle usually means corporate decision makers see enough signs of stability to forge ahead with major technology purchases.

This year has started with stronger U.S. job growth than many experts suggested, a sign of rising optimism among many employers, even though the economy still is expanding at tepid clip. In February, the U.S. unemployment rate fell to a four-year low of 7.7 percent.

Oracle also depends on international markets for a major part of its revenue. Europe's economy is still limping amid worries about unwieldy government debts and China's economic growth has been slowing. The geographic breakdown in Oracle's report should help decipher which parts of the global economy are experiencing the biggest problems.

Other factors besides a shaky economy could trip up Oracle. Like other long-established software makers, Oracle is facing more competition from rivals that sell software as a subscription service that can be reached from any Internet-connected computer or other device. That method, known as "cloud computing," is a departure from the industry's traditional approach of selling software programs that are installed on individual machines on a company's premises.

Oracle has been trying to evolve by spending billions of dollars acquiring smaller software makers specializing in cloud computing.

One of the best ways to determine how things are going is to focus on Oracle's sales of new software licenses and online subscriptions. The company predicted this number would rise by 3 percent to 13 percent from the same time last year. If Oracle doesn't at least deliver a gain of 8 percent, it probably will raise a red flag among investors.

Oracle's database software is essential for running a wide range of online services and its other products automate many different administrative tasks in offices around the world. The company's financial performance is also viewed on Wall Street as a bellwether that can have a ripple effect on the stocks of other business software makers.

 Analysts polled by FactSet expect earnings of 66 cents per share, excluding charges for past acquisitions and other costs, on revenue of $9.38 billion.

Oracle posted adjusted earnings of 62 cents per share on revenue of $9.04 billion at the same time last year.

 

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