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December 22, 2011

Oracle's Losses in 2nd Quarter Bad Sign for Tech Sector

By Oliver VanDervoort, Contributing Writer

Among the computing business world, there are few companies that are respected the way that Oracle is. The company is widely held up as a beacon for other companies to aspire to and is looked at as a company that sets the pace for the rest of the tech business sector. Just a couple of months ago, Oracle (News - Alert) was making another huge business decision with the $1.5 billion purchase of the customer service program provider RightNow.

That is why the financial struggles of the company in its second fiscal quarter is being seen as bad tidings for the tech sector in general. Oracle announced the company’s struggles on Tuesday and the lower revenues seem to indicate that governments and larger corporations might be cutting back when it comes to technology spending. 

Perhaps the most telling sign that technology spending is not growing quite as quickly as consumer gadgetry is that new software licenses only increased two percent over the same time period in 2010. Before the quarter began, several industry analysts had said they expected new software licenses to tick up double digits. Oracle itself had said they expected an increase of licenses somewhere between six and 16 percent.

Oracle has issued a bit of a caveat, claiming that part of the financial woes were really just about when contracts were getting signed. Safra Catz, Oracle’s CFO says that many of the companies that Oracle did business with in the second quarter did not sign official contracts until the very end of the quarter. Catz added that while the company struggled in the United States and Europe, she thinks there are several things Oracle can do to bounce back in the third quarter.

While the software licenses were bad news for the company, the hardware sales were even worse. Oracle purchased Sun Microsystems (News - Alert) for $7.4 billion last year, but has had problems getting its own hardware sales going in a positive direction. According to Tuesday’s report, Oracle posted a 10 percent loss from the same quarter in 2010. 

While consumer sales in 2010 were enough to make companies believe that Oracle’s problems might just be a blip on the radar screen, the company will need to bounce back quickly.

Edited by Jennifer Russell
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