NEW YORK (CNN/Money) - Software maker Oracle Corp. reported an earnings increase in its fiscal first quarter Friday, but the stock plunged in pre-market trading due to lower-than-expected sales.

The database software titan earned $440 million, or 8 cents a share, in line with the consensus forecast of analysts surveyed by earnings tracker First Call, and up from $343 million, or 6 cents a share, in the year-earlier period. It earned 7 cents a share excluding special items a year earlier, and operating margins improved to 30 percent from 29 percent a year earlier.

But sales came in at $2.07 billion, falling short of Wall Street's consensus estimate of $2.14 billion. Sales in the same quarter a year ago were $2.03 billion.

Shares of Oracle (ORCL: Research, Estimates) plummeted more than 5 percent at the opening bell Friday, to $12.30.

New software license sales were a major disappointment, falling 7 percent from a year earlier, to $525 million. New software licenses are viewed closely by Wall Street because they help indicate whether Oracle is adding more customers. Oracle did show improvement in its software license update and support business, however, with revenue increasing 14 percent, to $1.03 billion.

The fiscal first quarter is typically Oracle's weakest, but the market was not expecting license revenue to fall short by such a large amount. Jason Brueschke, an analyst with Pacific Growth Equities, was forecasting new license sales of $589 million. David Hilal of Friedman Billings Ramsey expected $584 million.

Brueschke said one reason the sales numbers were so weak might have been the distractions caused by Oracle's hostile takeover bid for PeopleSoft, which it launched in June.

"I'd be surprised if we get tacit admission from the company, but the takeover probably distracted Oracle's front-line sales reps and customers," said Brueschke.

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During a conference call with analysts Friday morning, Oracle said that its offer for PeopleSoft still stands and that it is awaiting word from regulatory agencies reviewing antitrust implications of an Oracle-PeopleSoft combination before proceeding further. The company said it hopes to receive results of the review by the end of November.

PeopleSoft competes with Oracle in the lucrative applications software business, developing tools that help manage human resources, customers, and supply chains for corporations. Oracle has been trying to boost its presence in this business in order to diversify as its flagship database business, which accounted for nearly 80 percent of new software licenses in the quarter, matures.

Oracle is also facing increasing pressure in the database business from the likes of IBM (IBM: Research, Estimates) and Microsoft (MSFT: Research, Estimates). To address this, Oracle unveiled its latest database product, known as Oracle 10g (for grid computing, which refers to the use of linking many low-cost computers to a pool or grid) with much fanfare.

Also during the call, Oracle CFO Jeff Henley gave less-than-exciting guidance for the fiscal second quarter, which ends in November, saying that the company expects to report earnings of 10 or 11 cents. The Wall Street consensus estimate is 11 cents.

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Henley also said that Oracle expects sales to increase 2 percent-to-5 percent from a year ago, which implies a revenue range of $2.35 billion-to-$2.42 billion. Still, Henley said that the company expects sales in the United States, which he admitted were weak in the first quarter, to improve in the second quarter and throughout the year. "Everything is in place to have a better fiscal year," Henley said.

But Richard Williams, strategist with Summit Analytic Partners, said Oracle's sales miss and relatively uninspiring guidance is not a good sign for enterprise software companies in general since it indicates that demand is still fairly soft. Many software stocks, including Oracle, have rallied lately on hopes for strong second-half results.

"This is a shockwave. Bulls are going to have to sit back and ask if they have baked in too much good news," Williams said.

To that end, shares of Oracle rivals SAP (SAP: Research, Estimates), PeopleSoft (PSFT: Research, Estimates) and Siebel Systems (SEBL: Research, Estimates) fell sharply at the opening bell Friday.

Analysts quoted in this story do not own Oracle and their firms have no investment banking relationships with the company.