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Oracle's Sun deal off to fast start

By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- Oracle's Sun integration got off to a fast start, as the company on Thursday reported an 18% sales increase from the year-ago quarter.

"The Sun integration is going even better than we expected," Oracle President Safra Catz said in a prepared statement. "We believe that Sun will make a significant contribution to our fourth quarter earnings per share as well as meet the profitability goals we set for next year."

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The Redwood Shores, Calif., company posted income for the three months ended February 28 that rose to $1.9 billion, or 38 cents per share, after adjustments for one-time expenses. That compares with net income of $1.8 billion a year ago.

Analysts surveyed by Thomson Reuters were expecting income of 37 cents per share.

Oracle (ORCL, Fortune 500) sales rose 18% to $6.5 billion, up from $5.5 billion last year, which beat analysts' forecast of $6.3 billion. Excluding the effects of Oracle's $7.4 billion Sun Microsystems takeover, sales were up 7%.

A 13% jump in new software licenses and 12% rise in software maintenance sales were the main drivers behind Oracle's strong performance. Analysts were looking for a boost in new licenses as an indicator of a recovery in business software spending.

Amid a deep recession and credit crunch, businesses sharply cut back their tech spending in 2009, but technology research company Forrester Research (FORR) predicts U.S. tech spending will rebound 6.6% and global IT spending, will rise 8.1% this year.

Analysts consider Oracle a bellwether for the software industry, and while the company's results showed improvement over last year, they were perhaps not as positive as the Street had hoped. Oracle shares fell in after-hours trading after the announcement.

"The bulls were looking for an absolute blowout quarter, and what they got was a good quarter," said Richard Williams, a senior software analyst with Cross Research. "It was an improving quarter, but the enterprise software stocks have been run-up in anticipation of a robust recovery, and what we're seeing thus far is, at best, a recovery -- not a robust recovery."

Oracle leads the market for business database software. Its Sun deal, completed Jan. 26, marks the company's first push into the IBM-dominated hardware business. Oracle announced in January that the company would hire 2,000 sales and engineering employees to support this new unit.

Oracle vs. SAP

On a call with investors Thursday, Oracle landed jabs against SAP, its arch rival and the world's largest business software company. Executives said they intended to grab "huge chunks" of market share from SAP because the company "is vulnerable and we can take them on in a variety of industries," they said.

The dig comes about a week after SAP co-CEO Bill McDermott told reporters that Oracle's model was outdated and that SAP would be launching new on-demand.

"The 20th Century model that Oracle has chosen to replicate is one of the past," McDermott said during that meeting.

In a press release, Oracle's Ellison also poked fun at SAP's trouble staffing their chief executive spot. "SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one."

SAP CEO Léo Apotheker, who had served as chief executive for only seven months, resigned last month, and co-CEOs McDermott and Jim Hagemann Snabe now lead SAP's C-suite. To top of page

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