Oracle's (ORCL) net income jumped 28% in the latest quarter, its biggest increase in more than two years and another sign that companies are spending more liberally on technology.
The company also forecast net income and revenue in the current quarter above analysts' expectations, and its shares rose 4% in extended trading.
Oracle's strong performance arrived amid worries about the industry's recovery. Other technology big shots, such as Cisco Systems (CSCO) and Intel (INTC), stirred fears with recent earnings reports that showed sluggish demand from consumers and state governments in the U.S.
Oracle, one of the world's biggest software makers, demonstrated in its latest numbers that it is shielded somewhat from sudden market swings because nearly half of its revenue comes from support contracts that provide consistent revenue throughout the year. The results were reported Thursday after the market closed.
Locking in new customers so they'll buy those support contracts is critical to Oracle. A key measure of how well the company is doing that -- the sale of new software licenses -- was higher than Oracle had earlier predicted.
Ellison Calls HP's Servers 'Slow'
Oracle also cited improving profitability at the Sun Microsystems business it bought nearly a year ago for $7.3 billion as another reason for its better-than-expected results. That acquisition gave Oracle a computer-server business and transformed the company into more of a one-stop shop for technology.
Oracle's outspoken CEO, Larry Ellison, used a conference call with analysts as an opportunity to slap Oracle's new foe, Hewlett-Packard (HPQ), whose servers Ellison called "slow" and "expensive" and "extremely vulnerable" to losing market share.
An HP representative noted that HP is the world's No. 1 server seller, a spot it frequently trades off with IBM (IBM), and said "Sun customers are running to HP in droves because they recognize we deliver superior technology, performance and pricing."
The results, and Ellison's barbs, underline the changing face of a company that over the past six years has spent more than $40 billion snapping up more than 70 companies, transforming itself into a clearinghouse for databases, business applications and the servers to power the software.
Growth Matches 2008
Oracle's net income in the three months ended Nov. 30 was $1.87 billion, or 37 cents per share, compared with $1.46 billion, or 29 cents per share, a year ago. The last time Oracle's net income grew by such a large margin was in 2008.
Excluding items, the company earned 51 cents per share in the latest period, topping the 46 cents per share that analysts polled by Thomson Reuters expected.
Revenue jumped 47% to $8.58 billion, higher than the $8.34 billion analysts expected. The increase in revenue was so large because Oracle didn't own Sun at this time last year.
Revenue from new software licenses rose 21% to $2.0 billion. The company had predicted only as much as a 16% rise.
For the current quarter, Oracle sees that figure growing 10% to 20% over last year, translating to a range of $1.89 billion to $2.06 billion.
Total revenue is expected to rise 32% to 36% over last year, to $8.45 billion to $8.71 billion, higher than the $8.41 billion analysts expected.
Net income is expected to be 48 cents to 50 cents per share, excluding items, also higher than the 46 cents per share that analysts predicted.
Tech Spending Accelerates
Yun Kim, an analyst with Gleacher & Co., said that spending on new information technology products and services is accelerating, helping companies such as Oracle. But not all are benefiting: Growth at some companies with aging product lines or those whose products aren't being upgraded as often has taken a hit, Kim said.
"The pace of new IT initiatives seems to be healthy - that's the key takeaway from Oracle's results," Kim said. "Some of the other tech bellwethers are struggling because they don't have the right products."
The past few months have been roiling times for the information technology world, and Larry Ellison has played a starring role in the biggest dramas: HP's ouster of CEO Mark Hurd after a sexual harassment investigation, and a corporate espionage trial between Oracle and software rival SAP (SAP).
Oracle shares rose $1.24 to $31.51 in extended trading, after the results were reported. During the regular trading session, they had fallen 22 cents, or 0.7%, to close at $30.27.