Strong software sales push Oracle shares to 19-month high

Wed Dec 19, 2012 10:41am EST
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(Reuters) - Shares of Oracle Corp, the world's No. 3 software maker, rose 4 percent to their highest in 19 months on Wednesday after it forecast strong sales for next year, prompting several brokerages to raise their price targets on the stock.

The company's results often set the tone for smaller software makers, and analysts said the 17 percent jump in its quarterly software sales boded well for the industry.

Investors pay close attention to new software sales as they generate high-margin, long-term maintenance contracts and are an important gauge of a company's future profits.

"Oracle delivered strong results in a challenging environment," Susquehanna Financial Group analyst Derrick Wood said in a note to clients.

Investors are worried that corporations would postpone spending on technology because of uncertainty over the year-end deadline for Congress and U.S. President Barack Obama to reach a compromise on the looming "fiscal cliff", an automatic rise in tax rates and government spending cuts next year.

Shares of Oracle, which competes with Germany's SAP AG and Inc, rose to $34.15 in early Wednesday trading on the Nasdaq.

Oracle said earlier this month it would give over $800 million back to shareholders, joining a rising number of companies accelerating dividend payments or declaring special dividends because of uncertainty surrounding the U.S. government's fiscal plans.

"(Oracle's) investments and efforts to build out its product portfolio and sales capacity are clearly starting to pay off handsomely and enable it to navigate the rough seas," Stifel Nicolaus analyst Brad Reback said.

Reback, who has a "buy" rating on the stock, raised his price target by $1 to $38.   Continued...

The company logo is shown at the headquarters of Oracle Corporation in Redwood City, California February 2, 2010. REUTERS/Robert Galbraith