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Oracle Profit Easily Tops Targets, Boosting Shares

Oracle'snew software sales surged and beat its own forecasts, and the company reported profit ahead of Wall Street estimates, pushing its shares higher in extended trading Thursday.

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The world's No. 3 software maker said sales of new software climbed 21 percent from a year earlier to $2 billion during its fiscal second quarter ended Nov. 30.

Three months ago, the company forecast that those sales would rise between 6 and 16 percent.

Oracle reported a profit excluding one-time items of 51 cents a share in its fiscal second quarter, up from 39 cents a share last year.

Sales mushroomed to $8.6 billion, up from $5.872 billion last year.

On average, a group of 36 equity analysts who follow Oracle saw the company reporting a profit excluding one-time items of 46 cents share, according to Thomson Reuters. Sales were seen at $8.344 billion.

Shares of the software company were up more than 4 percent in extended trading Thursday, changing hands at 10-year highs. Get after-hour quotes for Oracle here.

"I'm not convinced that this necessarily means the IT spending environment is robust. But it certainly suggests that Oracle's strategy is paying off." -Avian Securities, Jeff Gaggin

On a day when stocks were broadly higher, shares of Oracle closed slightly lower . Volume exceeded 45 million shares.

Investors pay close attention to new software sales because they generate high-margin, long-term maintenance contracts and are a good gauge of the company's future profits.

Oracle, which has spent more than $42 billion on acquisitions over the past six years, including its January 2010 purchase of hardware maker Sun Microsystems, has seen sales grow faster than those of rivals as it cross-sells its database, middleware, business management software and hardware to the same set of customers.

Avian Securities analyst Jeff Gaggin said that strategy has helped Oracle win business away from rivals including Hewlett-Packard, International Business Machines and SAP.

"I'm not convinced that this necessarily means the IT spending environment is robust. But it certainly suggests that Oracle's strategy is paying off,'" Gaggin said.

The world's No. 3 software maker said it has a $2 billion pipeline of sales of its Exadata computers. Three months ago the company sized the pipeline at $1.5 billion.

Exadata are specialized computers for handling tasks such as analyzing business trends that come pre-loaded with Oracle's software.

It posted hardware sales of $1.08 billion, slightly below the $1.1 billion that analysts were expecting.

"Hardware was so-so,'' said Cowen & Co analyst Peter Goldmacher. That was a bad sign, he said, because Oracle executives have said that they are looking to Exadata sales to fuel long-term growth.