During the tech industry’s last big slump, software and hardware vendors were slow to cut costs as falling demand pummeled profits.
This time around, Oracle isn’t taking chances. Oracle, the world’s No. 2 software company, hit Wall Street’s earnings target when it reported fiscal second-quarter results on Dec. 18, by aggressively cutting research and development, travel, and other costs as its customers curtail spending.
Amid a global economic slowdown that’s sapped business demand for computers and software, Oracle widened operating margins in the quarter ended Nov. 30 to 46 percent, compared with 41.3 percent a year earlier. While the software maker missed Wall Street’s estimates for total sales and new software bookings, its earnings of 34 percent a share, excluding certain items, met analysts’ projections. Better still, Oracle issued a third-quarter earnings outlook roughly in line with Wall Street estimates.
Shares of Oracle gained 4 percent in extended trading, after closing Dec. 18 down 13 percent, or 0.8 percent, at 16.61. The shares have lost 2.4 percent in the past month, compared with a 4.7 percent gain for the Nasdaq Composite Index.
Wide Range of Products Helps
Oracle displayed a knack for slicing costs while offering customers a wide range of products that it’s assembled through a slew of acquisitions the past four years, analysts said. “This company can hold the bottom line better than anyone,” says Brent Thill, Citigroup’s software research director, who rates Oracle’s stock a buy.
Analysts said Oracle has cut expenses in sales and marketing, and overseas R&D, and reduced sales and back-office expenses from its January acquisition of BEA Systems. A wide breadth of products lets Oracle salespeople zero in on where customers are still spending. “It all goes back to the all-you-can-eat buffet at Oracle,” Thill says. “You can pick one thing or everything, and they have something they can…