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Wall Street Beat: Software vendors report mixed results amid market tumult

Marc Ferranti | June 24, 2013
While Red Hat had a strong quarter, sales were soft for Tibco and Oracle.

Against a backdrop of market tumult, enterprise software companies this week reported mixed quarterly results.

Though Red Hat reported a robust quarter, Oracle revenue flatlined and Tibco's sales and profit declined year over year.

Meanwhile, shares of tech companies plunged Thursday along with the rest of the market, as investors took in the news that the U.S. Federal Reserve may taper off some initiatives to support markets as it sees the economy improve. For example, Fed Chairman Ben Bernanke for the first time suggested a timeline for winding down purchases of mortgage bonds and treasuries, possibly next year.

Though the Fed still plans to keep interest rates low, stocks plunged Thursday. The broad Standard and Poor's 500 index declined 2.5 percent, its worst drop since November 2011. The Dow Jones Industrial Average ended down 353.87 points, or 2.3 percent, with all of its 30 components in negative territory, including its five tech stocks: Hewlett-Packard, Microsoft, Cisco, IBM and Intel.

Stocks again declined in Friday morning trading, though not sharply. The only tech stock in the Dow that was trading higher was Cisco, up by $0.04 to $24.22. The Nasdaq Computer index, which tracks more than 300 tech-related securities, was down by 1.29 percent to 1603.27.

Though software has been a bright spot for tech, vendors are heading into what is expected to be a bumpy ride for the economy and the market.

"While we are incrementally more optimistic about the macro demand for software IT, we fully recognize that the world economy is still fragile and it is improving haltingly," said Canaccord Genuity analyst Richard Davis in a research note about Oracle. "This means that summer 2013 will likely be one full of a confusing mishmash of data points."

Though Oracle Thursday reported a 10 percent year over year increase in profit, to US$3.8 billion, revenue for the three months ending in May was flat at $10.9 billion. Oracle tried to highlight the good news, saying that SaaS (software as a service) revenue growth was up 50 percent. However, SaaS is only a small part of new software licenses and cloud software subscriptions, which rose a tepid 1 percent to $4 billion. New software licenses are key for growth for a software company, so the weak increase has investors worried. Oracle shares declined by $2.71 in Friday morning trading, to $30.50.

Oracle maintenance fees, meanwhile increased 6 percent to $4.4 billion, providing a cushion for the company, but hardware revenue continued to decline, dropping 9 percent to $1.43 billion, as Oracle restructures its offerings to focus on high-end systems.

Oracle executives noted that economic concerns appeared to put a damper on enterprise spending.


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