Sep. 16--Even as some customers continued to avoid new purchases, prompting a 5 percent drop in revenue for the second quarter in a row, Oracle reported an increase in profit on Wednesday, as it cut spending and reaped a growing bounty of recurring fees from software maintenance and upgrades.

After months of global recession, executives at the Redwood City software giant said there are signs business will improve in coming months. And despite delays caused by a European antitrust investigation, Oracle President Safra Catz stood by her prediction that Oracle's pending acquisition of Sun Microsystems will provide $1.5 billion more in operating income in the first year after the deal becomes final.

That may require drastic cuts in staff and operations at the Santa Clara computer maker, however. Sun has struggled financially over the past year and analysts said delays in completing the acquisition could weaken Sun further. Several analysts said this week that Oracle may have to cut spending by 25 percent or more at Sun to meet its financial goals.

Oracle executives offered few new details Wednesday about their plans for Sun, while holding a conference call to discuss their earnings with investment analysts. CEO Larry Ellison, however, extolled the virtues of a new high-speed database machine that Oracle and Sun developed in partnership over recent months.

Unveiled earlier this week, the new Exadata appliance combines Oracle software with memory technology developed by Sun, producing a machine that can process transactions at a speed far exceeding any competing product, according to Ellison. Oracle had developed an earlier version with Hewlett-Packard, but Ellison said the new machine is twice as fast and represents what he hopes to do with Sun in the future.

Oracle's earnings report, meanwhile, showed a profit of $1.1 billion for the quarter ending Aug. 31, up 4 percent from a year ago. Revenue was $5.1 billion, down 5 percent from a year ago and slightly lower than the $5.25 billion that analysts surveyed by Thomson Reuters had expected.

The company said it earned 22 cents a share, or 30 cents a share after excluding one-time charges, which was in line with analysts' forecasts. But with uncertainty hanging over the Sun deal, Oracle's stock closed Wednesday at $22.13, down 2.3 percent for the day, before the earnings report was released. It fell further, to $21.64, in after-hours trading.

Oracle is one of the world's biggest sellers of database software, middleware and applications that companies use for tracking customer orders and other vital functions. In other recent quarters, it has reported modest profit declines, but it has generally avoided the worst effects of the recession. In part, that's because it has a huge base of customers who provide recurring revenue in the form of maintenance and renewal fees for software purchased in previous years.

In the most recent quarter, Oracle's revenue from new software licenses fell 17 percent, to $1 billion, as the economy kept some customers wary of new purchases. Revenue from software updates and support agreements rose 6 percent, to $3.1 billion, however. The company also trimmed operating expenses by about 13 percent from a year ago.

Catz said she expects revenue for the new quarter that began Sept. 1 will be roughly even or up to 3 percent higher than a year ago. "We have some very good momentum," she added.

But the Sun deal has been stalled by European regulators, who said they may take until January to decide if it would hurt competition in the database market. Rival computer makers have taken the opportunity to lure away some of Sun's customers, and investment analysts say further delay could make Sun less valuable to Oracle.

Oracle can still benefit from the acquisition, said analyst Ross MacMillan of Jefferies & Co. But he added, "the sooner Oracle can close the deal, the better in our view."

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