Why Oracle Still Looks Good to Go

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Tech giant Oracle (Nasdaq: ORCL  ) recently came out with fourth-quarter results and beat analyst expectations in the process. The quarter's strength came largely from improved sales figures for its new software licenses. However, the company's server hardware business that it acquired through Sun Microsystems in 2009 is still trying to chart a turnaround and has proved to be a major letdown so far. Let's take a closer look at the company's numbers.

Figuring it out
Oracle's revenue increased 1.3% to $10.9 billion on the back of a strong performance by its software-centric businesses. However, sales in Europe, the Middle East, and Africa dipped by about 7%, mainly because of thinning corporate budgets as a result of the ongoing European debt crisis. Net income, on the other hand, ended 8% higher at $3.4 billion.

An area of concern has been the hardware products business, which saw sales decline 16% to $977 million. Even worse, Oracle says sales in this segment will decline further in the upcoming first quarter -- anywhere between 7% and 17% compared with the previous year. Not a very comforting forecast, given that the division's revenue has declined consistently over the past four quarters.

Still going strong
However, even with declining hardware sales, Oracle appears to be holding out quite well under the difficult economic circumstances. Rival IBM (NYSE: IBM  ) , which International Data Corporation recently ranked as the global leader in enterprise social software, is also doing quite well, despite significant exposure to European markets. On the flip side, enterprise provider Cisco (Nasdaq: CSCO  ) , which focuses on the hardware side, is experiencing similar woes selling its wares in the European market.

So how will Oracle perform over the coming months?

Given the uncertainty in Europe, I would expect Oracle to slow down or experience a slight dip in revenue, as corporate spending also slows down to a certain extent. However, given the diversified nature of Oracle's businesses in data-center products, services, and especially cloud computing, this company should remain relatively strong in the long run.

The Foolish bottom line
Oracle has been a regular dividend payer and plans to buy back as much as $10 billion in common stock over the forthcoming quarters. But if economic conditions continue to worsen, that may not be the best use of its resources. Either way, I'll be keeping a close eye on Oracle's performance, and so can you by adding it to your free Watchlist.

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Fool contributor Keki Fatakia holds no shares in any of the companies mentioned in this article. The Motley Fool owns shares of Cisco Systems, Oracle, and IBM. Motley Fool newsletter services have recommended creating a synthetic long position in IBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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