Why Oracle's (ORCL) quarterly earnings matter

Oracle (NASDAQ: ORCL) posted much stronger than expected earnings. The company announced that fiscal 2008 Q2 GAAP earnings per share were up 36% to $0.25, compared to the same quarter last year. Second quarter total GAAP revenues were up 28% to $5.3 billion, while quarterly GAAP net income was up 35% to $1.3 billion.

The company also took a punch at rival SAP (NYSE: SAP) by pointing out that in Q2 Oracle's applications new license sales grew 63% compared to SAP's new license sales growth rate of 15% in its most recently completed quarter.

A great deal of Oracle's revenue was driven by upgrades to its software, and this is a strength that is likely to continue.

The most obvious take-away from the Oracle numbers is that there is still a great deal of strength left in enterprise technology sales. The company is big enough so that its results are a reasonable proxy for the extent to which large companies are willing to spend on tech. The news is good.

The other, less obvious lesson the Oracle's earnings bring, is that large technology companies can successfully grow through major acquisitions. Oracle has been a master at buying and integrating new companies. The only other tech company that has comparable strengths in the arena is Cisco (NASDAQ: CSCO).

In an industry where scale matters, Oracle has proved that it can build its business through both organic growth and M&A.

ORCL shares are up nearly 7% in premarket trading.

Douglas A. McIntyre is an editor at 247wallst.com.