SAN FRANCISCO: Oracle Corp., the world's second-biggest software company posted a 15 percent drop in quarterly net profit due to charges related to its $10.6 billion purchase of rival PeopleSoft.

Oracle's profit, excluding charges, was ahead of the average Wall Street expectation, and the company raised its full-year profit forecast, but shares fell about 2 percent as revenue missed analysts' targets and on what some analysts called disappointing software application sales.

Oracle Co-President and interim Chief Financial Officer Safra Catz said Oracle expected total costs related to PeopleSoft to be about $611 million. She added that Oracle expected a restructuring of PeopleSoft to be completed in the next six months.

Net income for Oracle's fiscal third quarter ended Feb. 28 fell to $540 million, or 10 cents a share, from $635 million, or 12 cents a share, a year ago, Oracle said.

Revenue rose to $2.95 billion from $2.51 billion, the Redwood Shores, California-based company said.

Excluding items, Oracle reported third-quarter earnings of 16 cents a share, 1 cent ahead of the analyst consensus.

But Wall Street had expected revenues of $3.05 billion, according to Reuters Estimates.

Analysts said Oracle's results were generally healthy, as they expected, but were disappointed with the performance of Oracle's software applications, traditionally a small part of its business, but a primary driver behind Oracle's motivation to buy software makers PeopleSoft and Retek.

"For those concerned about the integration of PeopleSoft and the health of Oracle's applications business, these results will not get the monkey off their back," said Piper Jaffray analyst Tad Piper, who rates Oracle "outperform."

Piper noted the results of Oracle's applications, which automate business processes like payroll and accounting, would have declined by about 14 percent from a year ago without the addition of PeopleSoft's software revenues.

FULL-YEAR EPS OUTLOOK RAISED

Citing an improved outlook for the fourth quarter, Oracle raised its full 2005 forecast for a profit before items of 64 cents to 65 cents a share from a previous forecast of 62 cents a share, Catz said.

Analysts had been expecting 63 cents, according to Reuters Estimates.

Oracle said license revenue, or sales of new software, in its mainstay database business rose 12 percent to $795 million in the quarter from $707 million a year ago.

New sales of applications software, where Oracle competes closest with German rival SAP, rose 9 percent to $152 million from $140 million.

About $31 million of its third-quarter applications revenue stemmed from PeopleSoft's business, Catz said.

Oracle Co-Founder and Chief Executive Larry Ellison dismissed market concerns that Oracle's core database business was losing market share during a conference call.

"Just the opposite is true ... We are taking market share from IBM," Ellison said, referring to International Business Machines Corp., Oracle's chief rival in the database software business.

Ellison said Oracle's database market share rose to about 41 percent from about 40 percent in a recent report from market research firm IDC.

Catz said on a call with reporters that Oracle will largely confine itself to acquisitions that are smaller than its purchase of PeopleSoft.

The company plans to stick to smaller deals, similar to its recent acquisition of Retek Inc.

Oracle shares, which closed down 16 cents at $12.49 on Nasdaq, fell further to $12.28 after-hours on the Inet electronic brokerage system. The stock, which has a 52-week high of $14.87, trades at a price-to-earnings discount relative to many of its peers, including SAP.