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Oracle Results Offer Tech Reality Check

The database giant's sales miss sheds some light on the much-hyped tech recovery



) --


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first-quarter results

have provided a reality check for the


tech sector, as the software maker's sales came in below analysts' estimates.

The database giant, which posted its results after market close Wednesday, was in line with analysts' profit forecast, but its revenue felt the effects of weak demand, especially overseas. Oracle's shares dipped 79 cents, or 3.57%, to $21.34 in pre-market trading Thursday as investors digested the revenue miss.

Oracle's license revenue, in particular, took a hit, according to

Safra Catz

, the company's president.

"We had slower than usual growth in database middleware license revenue in Europe and APAC," she said, during a conference call late Wednesday. This was largely thanks to a tough year-over-year comparison and the fact that software resellers such as


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are selling fewer databases, she added. To illustrate this point, Catz explained that SAP's applications business is down 40%.

Oracle's results were also impacted by foreign currency, which reduced its GAAP earnings by 2 cents a share.

The company, however, is still seen as a good bet by analysts, who point to its strong gross margins and solid second-quarter guidance.

"We remain a 'Buy' despite weaker first-quarter license

revenue," wrote Ross MacMillan, an analyst at Jefferies & Company, in a note released Thursday. The analyst pointed to Oracle's non-GAAP gross margin of 80%, which came in above Jefferies' estimate of 78%, as evidence of the company's health.

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Excluding items, Oracle expects second-quarter earnings between 35 cents a share and 36 cents a share, up from 34 cents in the same period last year. Analysts surveyed by Thomson Reuters had predicted second-quarter earnings of 36 cents a share.

"Oracle guided in-line for the second quarter of its fiscal 2010," added Pat Walravens, an analyst at JMP Securities, in a note released Thursday, maintaining his "market perform" rating for the company. Walrvens, however, voiced his concern over Oracle's



Sun Microsystems



Already approved by the


and by Sun shareholders, the $7.4 billion deal has been held up on the other side of the Atlantic, where European Commission (EC) officials recently launched an

antitrust probe


"Oracle has a dominant market position and a strong product line-up, but we remain on the sidelines for the time being pending the acquisition of Sun Microsystems and signs of improvement in the close rates," wrote the analyst. "In terms of lateral implications, we think Oracle's results, particularly its weakness in Europe, bode poorly for SAP."

Oracle, which competes with


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, had hoped to close the Sun acquisition sometime during the summer, but this has now been delayed pending EC approval.

"We are still quite confident that we will increase operating income earnings by $1.5 billion in the first full year after the close of the merger," said Catz, during last night's conference call, but was unable to say when the deal is likely to close.