Wall Street Beat: Enterprise Software Sales Look Strong

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Though earnings season won't start in earnest until next month, financial reports and earnings forecasts from companies as varied as Adobe, Red Hat, Oracle and Qualcomm this week indicate that sales across a range of technology products are recovering from the Great Recession.

Oracle on Thursday reported financial results for the three-month period ending Feb. 28, saying profit was dragged down by restructuring charges incurred in the wake of the company's purchase of Sun Microsystems, which closed in January. Earnings declined by 10 percent compared to the year-earlier quarter, to US$1.2 billion.

However, new license sales, key to the growth of any software company, increased 13 percent to $1.7 billion. Total revenue was up 17 percent to $6.4 billion.

Oracle shares declined by $0.27 to $25.82 in after-market trading after the announcement, possibly because investors wanted to see stronger earnings. The bellwether software vendor's revenue increases, however, indicate that enterprise software sales are picking up.

Red Hat, reporting quarterly results on Wednesday, also had a good sales story to tell. Total revenue for the three-month period ending Feb. 28 was $195.9 million, an 18 percent increase from a year earlier. Net income for the quarter was $23.4 million, compared with $16.4 million a year earlier.

Enterprise trends bode well for the company, according to Jim Whitehurst, Red Hat's CEO. "As we look forward, we believe that we are well-positioned at the confluence of several major technology trends in the data center, including cloud computing, virtualization and middleware," Whitehurst said in the company's earnings statement.

Adobe Systems, reporting Tuesday, said revenue for its first fiscal quarter ended March 5 hit $858.7 million, compared to $786.4 million for the same quarter last year. Higher operating expenses did some damage to profit, which came in at $127.2 million compared to $156.4 million a year earlier.

However, the company's forecast for the current quarter topped analysts' expectations. Adobe expects net earnings between $0.39 and $0.44 per share on sales of $875 million to $925 million. Analysts polled by Thomson Reuters were predicting profit of $0.41 per share on sales of $860.5 million.

"Stability in our creative business, combined with strength in our Acrobat and Omniture solutions, helped drive strong financial performance in Q1," said Shantanu Narayen, Adobe's CEO, in the company's earnings report. "The market trends enabling our diverse business remain strong and we are bullish about the upcoming launches of Flash Player and Creative Suite."

Also on Tuesday, Progress Software, which specializes in business-process management software, reported an uptick in sales for its fiscal quarter ending Feb. 28. Revenue was $127.5 million, up 6 percent from the same period last year. Net income amounted to a loss of $1.0 million, compared to a profit of $3.7 million in the same quarter last year, due to restructuring charges.

Though the spotlight was on enterprise software this week, there was upbeat news form the chip arena as well. Qualcomm, which specializes in chips for mobile devices, on Wednesday updated its guidance for the quarter ending March 28. It now expects earnings to hit $0.56 to $0.58 per share on revenue of $2.55 billion to $2.65 billion. Qualcomm's prior forecast was for earnings of $0.49 per share to $0.53 per share on revenue of $2.4 billion to $2.6 billion.

The higher forecast is due to "strength in licensing revenues and favorable volume and product mix in our chipset business," said company CEO Paul Jacobs in a company statement.

Revenue for the worldwide chip industry as a whole will grow 16 percent this year, IDC analysts said at an industry event in Taipei Thursday. That forecast is lower than predictions from other market research companies, mainly because IDC is not as optimistic about consumer sales. However, IDC analyst Mario Morales acknowledged that the sector is "in a full recovery mode."

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