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You are here: Home / Business Briefing / Oracle Leads Rally in Tech Stocks
Oracle Leads 'What Recession?' Tech Stocks Rally
Oracle Leads 'What Recession?' Tech Stocks Rally
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Despite continued talk of a recession, tech companies are rebounding -- and even breaking records. Oracle's shares leaped to a nine-year high Friday on news of its quarterly earnings. The strong earnings from Oracle and Research In Motion, along with Hewlett-Packard's multibillion-dollar spending spree and other strong economic indicators, set off a tech-stock rally on Wall Street.

Oracle's results for the first fiscal quarter of 2011 saw revenues soar 48 percent to $7.5 billion. Operating income was up 10 percent to $1.9 billion, and net income was up 20 percent to $1.4 billion. That led to a 20 percent rise in earnings per share compared to the year-ago period.

Sun: Oracle's Next Frontier

Oracle CFO Jeff Epstein said the company executed better than expected on both the top and bottom lines for the quarter. Oracle President Safra Catz added that the software business saw strong growth in all regions, with new license sales up 25 percent. The hardware business also saw an unexpected surge, with Sun Solaris servers and Exadata leading the charge.

Oracle brought in ex-HP CEO Mark Hurd to serve as co-president and integrate Sun into the Oracle lineup. Hurd and Oracle CEO Larry Ellison both pushed the Sun and Exadata expectations for the coming quarters. Exadata's pipeline now exceeds $1.5 billion for the full fiscal year. But many analysts insist Sun needs some attention.

"Next week at Oracle OpenWorld, we will announce two new high-end systems that combine Sun hardware with Oracle software," Hurd said. "We will invest over $4 billion in research and development this year, so our already-robust product portfolio is only going to get stronger."

RIM Performs

Despite the fact that RIM is losing market share, the BlackBerry maker's earnings also helped spur a Wall Street rally. RIM's second-quarter revenue was $4.62 billion, up nine percent from the year-ago period. RIM earned most of its revenue from devices (79 percent) and services (17 percent). RIM shipped about 12.1 million BlackBerrys and added about 2.5 million new net subscriber accounts in the quarter.

"We expect a continuation of this momentum in the third quarter as we extend the rollout of new products, including the BlackBerry Torch, into additional markets and benefit from heavy promotional activities and increasing customer demand as we head into the holiday buying season," said Jim Balsillie, RIM co-CEO.

What Recession?

The big question for many in the tech industry is, "What recession?" Tech spending has been strong. As Zeus Kerravala, a vice president at Yankee Group, explains it, tech companies are benefiting from a "starvation effect." So many IT projects have been held back for so long. Now that there's a chance for IT departments to spend money, they are spending it. His concern is the rhetoric about a possible slowdown.

"We might will ourselves into a bad second half just because everybody is waiting for that shoe to drop," Kerravala said. "You might see companies cut spending to get ahead of it instead of being the last company to cut spending, which nobody wants to be. But right now it's very competitive out there. The big difference now is that companies are looking to use IT to grow instead of just for cost-containment purposes."

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