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Oracle Income Up 28 Percent On Strong Software License Sales

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Oracle Corp. company headquarters in Redwood Shores. (Justin Sullivan/Getty Images)

Oracle Corp. company headquarters in Redwood Shores. (Justin Sullivan/Getty Images)

REDWOOD SHORES (AP) — Oracle Corp.’s net income jumped 28 percent in the latest quarter, its biggest increase in more than two years and another sign that companies are spending more liberally on technology.

Oracle’s strong performance arrived amid worries about the industry’s recovery. Other technology big shots, such as Cisco Systems Inc. and Intel Corp., 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.

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 Co., whose servers Ellison called slow and expensive and “extremely vulnerable” to losing market share. An HP representative did not immediately return a message for comment from The Associated Press.

Ellison praised another rival, IBM Corp., calling their products “quite competitive.”

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 percent 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.

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.”

Oracle shares rose $1.33, or 4.4 percent, to $31.60 in after-hours trading, after the results were reported. During the regular trading session, they fell 22 cents to close at $30.27.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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