Adobe, Oracle earnings hint at business recovery
Solid reports from the software makers show companies are starting to spend more.
That's the takeaway after strong earnings reports this week from Oracle (ORCL) and Adobe (ADBE). The companies specialize in business software, and both said sales and profit are doing better than analysts expected.
Investors cheered the news, sending shares of both companies up Wednesday. Oracle's share price spiked nearly 8% to $30.52, and Adobe saw shares rise more than 3% to $25.49.
Post continues below.
Still, the results weren't enough to confirm a bona fide tech recovery. What we're starting to see is an environment in which software sales are creeping up but hardware sales remain weak.
The PC market is still struggling in the U.S. and Western Europe, mainly because consumers have embraced Apple's (AAPL) iPad instead of traditional computers. Forecasting firm Gartner says it expects spending by businesses and especially consumers to tighten as the economic outlook remains dark.
Expectations have been extremely low, and that may be why Oracle and Adobe were able to beat them. "There were concerns that the environment was difficult and demand trends were starting to deteriorate," a Pacific Crest Securities analyst that covers Adobe told Bloomberg. "The guidance looks pretty strong."
Adobe makes Photoshop and other graphic design programs. It also sells customer management and online marketing systems for businesses.
It gave a sales forecast of $1.08 billion to $1.13 billion for the fourth quarter. Analysts were expecting $1.07 billion. The company estimated profit at 57 cents to 64 cents a share, while analysts were expecting 58 cents.
For the quarter ended Sept. 2, sales rose 2.3% to $1.01 billion. That was a little lower than the $1.03 billion analysts were looking for. But profit topped estimates at $195.1 million, or 39 cents a share, from $230.1 million, or 44 cents, a year ago. After excluding certain costs, earnings were 55 cents, higher than the 54 cents analysts expected.
Oracle also beat analysts' projections after seeing new software license sales rise 16%. It makes powerful computer systems that help companies manage databases, customers, the supply chain and other operations.
Profit rose 36% to $1.84 billion, or 36 cents a share, from $1.35 billion, or 27 cents a share, a year earlier. Analysts were looking for 35 cents a share. Sales rose 12% to $8.37 billion, which is about what analysts thought would happen.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
With the universe of this category in its seasonal sweet spot, these picks have tailwinds propelling them into the new year.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.