Shares of Oracle dropped yesterday after first-quarter results from the world's second-largest software company failed to produce a hoped-for bounce in new licence sales.

The news hit other technology stocks, which had enjoyed a strong summer rally on a growing belief that sector's recovery was beginning to unfold.

Oracle's revenues from new licences, a closely watched measure for future growth, fell 7 per cent to $525 million (€465 million) during the latest quarter. But the company, which employs about 1,000 people in Dublin, raised its profit margins and lift its net income by 28 per cent.

Despite the disappointing quarter, Mr Chuck Phillips, Oracle's executive vice-president, forecast that the company would sell more new licences this year for application software than rival PeopleSoft, for which it has launched a hostile takeover bid.

PeopleSoft's acquisition of JD Edwards this summer has put it alongside Oracle as the main rival to Germany's SAP in selling the applications software run by big firms - but Oracle's core database business makes it bigger overall.

Mr Jeff Henley, Oracle's chief financial officer, said: "We expect to see continued improvement in total revenue and new licence growth" in the next quarter, with a recovery in North America - the source of the last quarter's disappointment - leading the rebound.

Oracle's net profit rose 28 per cent to $440 million, or 8 cents per share, in line with the consensus forecast.

Revenues were only up 2 per cent at $2.07 billion.

Oracle generated $1.25 billion in cash during the first quarter as its profit "hit record levels", according to Mr Henley.