Oracle net drops on acquisition-related costs

Michael Kahn

SAN FRANCISCO: Software maker Oracle Corp. on Thursday posted a lower quarterly profit, as acquisition-related costs rose and revenue missed analyst estimates, sending shares down more than 3 percent.

Second quarter net income for the period ended Nov. 30 fell to $798 million, or 15 cents per share, from $815 million, or 16 cents per share, from a year earlier. Revenue rose 19 percent to $3.29 billion.

In the past two years, Oracle has spent some $19 billion buying up its rivals, such as PeopleSoft, Siebel Systems and others in a bid to lead consolidation in what the company sees as a maturing industry for business aimed at large companies.

"They missed on revenue," said FTN Midwest analyst Trip Chowdry, who added that many were expecting Oracle to beat the consensus expectations. "This is all about execution now."

Chowdry also said its Siebel Systems acquisition prompted hesitation among customers as they weigh whether to buy business software from Oracle or its competitors such as SAP AG or Salesforce.com Inc.

Excluding one-time items, the company said it posted a per-share profit of 19 cents, up 16 percent from 16 cents in the year-ago period. That was in line with the average Wall Street view of 19 cents, according to Reuters Estimates, and revenue was pegged at $3.41 billion.

Oracle said that net revenue of its database middleware new license revenue rose 5 percent to $785 million and net revenue of its applications software rose 24 percent to $266 million. Net services revenue rose 26 percent to $675 million.

Oracle stock has lost nearly 7 percent since the beginning of the year, while major rival SAP AG of Germany shares traded on the New York Stock Exchange are up about 5 percent during the same period.

Oracle shares trade at about 16 times its projected 2006 earnings per share, excluding items, while SAP shares excluding items on the New York Stock Exchange are valued at a 27 times projected earnings.

(Additional reporting by Duncan Martell)