(Reuters) – Several brokerages raised their stock price targets for Oracle Corp, saying the company is set to see higher growth from its cloud computing services and newer database software products, offsetting declines in hardware sales.
The world’s No.3 software maker has been struggling to turn around its Sun computer division amid tight technology budgets and on Thursday said hardware sales dropped 24 percent from a year ago.
“We expect (Oracle’s) business to remain steady with the upcoming release of its new flagship database product, continued momentum around its cloud business and accelerating Exa-systems business,” ThinkEquity analyst Yun Kim said.
Chief Executive Larry Ellison said on an earnings conference call that the company will announce an upgraded version of its 12c database software product on September 30.
The company forecast that new software sales and subscription revenue would range from 5 percent to 15 percent this quarter.
Oracle is also gaining from its recent acquisitions of cloud-based service providers Taleo and RightNow, and analysts said revenue from these businesses powered the company’s cloud revenue to $222 million in the first quarter.
Oracle’s struggling hardware business could, however, see improvement in the first half of next year, driven by the growth in engineered systems, notably Exadata, J.P. Morgan Securities analyst John DiFucci said.
Oracle’s Exadata segment includes products that combine its hardware and software components to increase computing speed and reduce storage requirements. The company expects its engineered systems segment to contribute over $1 billion this year.
Shares of the company rose 2 percent to $32.94 in early trading on the Nasdaq on Friday.
(Reporting by Neha Alawadhi in Bangalore; Editing by Saumyadeb Chakrabarty)
