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By Jim Finkle

BOSTON (Reuters) – Oracle Corp (ORCL), the world’s No. 3 software maker, posted stronger-than-expected quarterly profit as operating margins hit their highest level ever for the period, sending its shares up 6 percent.

The company also reported a 14 percent rise in sales of new software licenses and gave an outlook for the current quarter that matched expectations on Thursday, reassuring investors who had feared that the weak economy would cause Oracle to miss.

Technology shares, including Oracle’s, had fallen on concerns that the global credit crisis would hurt company and consumer spending.

"The results are better than the worst fears by quite a bit," said Mark Murphy, an analyst with Piper Jaffray.

Oracle, led by billionaire Larry Ellison, said net income rose to $1.1 billion, or 21 cents per share, in its fiscal first quarter ended August 31, from $840 million, or 16 cents, a year earlier.

Excluding special items such as acquisition-related expenses, profit per share was 29 cents, beating the average analyst forecast of 27 cents, according to Reuters Estimates.

Oracle said its adjusted operating margin was 40 percent, up 3.5 percentage points from a year-ago and the highest ever for its fiscal first quarter. Co-President Safra Catz told analysts on a conference call that she expected margins to continue to improve.

Edward Jones analyst Andy Miedler said that investors should not take Oracle’s results as a sign of how other technology companies are faring in the economic downturn.

"Oracle is a very high quality company so we would expect them to do better than many technology companies. With Oracle to be one of the first out of the gate … it would be premature to extrapolate too much," Miedler said. Most major tech companies report results starting mid-October.

One cause for concern, said Goldman Sachs analyst Sarah Friar, was a 12-percent drop in Oracle’s sales of business management software to $331 million. Oracle competes with SAP AG (SAPG.DE: Quote, Profile, Research, Stock Buzz) in this market, and had in the previous quarter posted a 36 percent rise in sales.

Business management applications like Oracle’s PeopleSoft and Siebel, tend to be more vulnerable to economic swings.

"Their apps number does make me worry a bit about what is going on externally in the economy. Apps to me is a leading indicator of what is going on in the economy," said Friar. "When you create a new project, that is typically when you buy a new application. When people stop spending, they stop buying new apps."


Despite that concern, Oracle’s results and outlook were positive for its shares, which were trading at $19.90 after hours, compared to their Nasdaq close of $18.75.

The stock has declined about 19 percent since hitting a seven-year high of $23.62 on August 8, amid growing concern that sales and profit would be hit as the global economy weakens.

Oracle said new software sales rose 14 percent from a year earlier to $1.2 billion. In June, the company had forecast such sales to grow 10 percent to 20 percent. The figure is closely watched by investors because it is a barometer of future revenue.

Oracle generally charges customers annual maintenance fees equal to 22 percent of the original purchase price of their software. Those fees entitle them to fixes for bugs, upgrades and help desk support.

"I’m very impressed," said Cowen & Co analyst Peter Goldmacher. "These guys put together a phenomenal license number. In a market where there is not a whole lot of growth, for these guys to grow like they are growing, it can only mean they are taking market share."

Oracle said sales of new database software and related programs rose 27 percent to $906 million in the quarter. Goldmacher said that Oracle, the largest maker of database software, is likely taking share in that market from No. 2 player IBM (IBM.N: Quote, Profile, Research, Stock Buzz) and third-ranked Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz).

For the current quarter, the Redwood City, California-based Oracle forecast new software license revenue to rise 5 percent to 15 percent, adjusted total revenue to rise 12 percent to 15 percent, and earnings per share excluding items at 35 cents to 36 cents.

Analysts were expecting adjusted revenue growth of 15 percent and earnings per share of 35 cents for the current quarter, according to Reuters Estimates.

Adjusted revenue in the August quarter rose 18 percent to $5.4 billion, matching the average analyst forecast.

(Additional reporting by Tiffany Wu, editing by Leslie Gevirtz, Carol Bishopric and Brad Dorfman)

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