Database sales spruce Oracle's profit

Duncan Martell

SAN FRANCISCO: World's second largest software maker, Oracle Corporation posted an 11 per cent rise in quarterly net profit, meeting analysts' expectations due to strong sales of its database software.

Oracle chief financial officer Jeff Henley said on a conference call with analysts he expects the company to post current-quarter earnings per share of 17 to 18 cents on a 6 to 10 per cent rise in revenue, in line with current Wall Street expectations. Henley also said he expects new sales of software to rise 5 per cent to 15 per cent.

As in past quarters, Oracle's flagship database business fueled sales and profit growth with revenues gaining 16 per cent from one year ago. Its applications business, where it competes against SAP AG, PeopleSoft Inc. and others, was flat compared with a year ago, reflecting weaker demand across that industry.

"All of the growth this year is in the database business -- all of it," said Charles Di Bona, an analyst at Sanford Bernstein. "This is a database company and people have to stop thinking of them as an applications company."

Net income for the third quarter ended February 29^th 2004 was $635 million, or 12 cents a share, compared with net income of $571 million, or 11 cents a share, a year earlier. Revenue rose 9 per cent, boosted by currency effects, to $2.51 billion from $2.31 billion a year ago, the company said.

Oracle is the third-biggest supplier of business applications software that is sold to large business customers to manage things like finances, human resources and sales forces. It is pursuing a hostile takeover of rival PeopleSoft, the No. 2 company in that market. U.S. regulators oppose the deal on antitrust grounds and have filed suit against Oracle.

On Wednesday, a federal court judge set a June 7^th 2004 trial date for the U.S. Department of Justice's lawsuit. The trial is expected to last about four weeks.

"We're looking forward to hearing from the court," said Chief Executive and Oracle co-founder Larry Ellison.

In an interview, Oracle President Charles Phillips said Oracle's PeopleSoft bid has not hurt its results. "Obviously, we think the risk-reward (ratio) is worth it."

EARNINGS MEET FORECASTS

Analysts, on average, had expected the company to post earnings per share of 12 cents, on average, within a range of 11 cents to 13 cents, on revenue of $2.51 billion, according to Reuters Research, a unit of Reuters Group Plc.

The company had forecast in December that earnings per share would be 11 cents to 12 cents.

License revenue, or the sales of new software, rose 12 per cent to $847 million. License revenue is a key indicator of future revenue growth.

Sales of new database software rose to $700 million in the third quarter from $603 million a year ago. Applications software sales were unchanged at $140 million. The remaining $seven million was in "other" new software sales, Oracle said.

"This is the reality of the applications business now -- it's not growing," Di Bona said.

Jeff Henley, Oracle's Chairman and Chief Financial Officer, said on a conference call with reporters that he continues to see steady, modest growth this year on technology spending.

"Business sentiment seems to be getting more confident," Henley said. He made similar comments in December, when Oracle reported fiscal second-quarter results.

Henley also said that price competition in its markets remained intense, as it has for the last couple of years, but he noted no change in the severity of that intensity.

(Additional reporting by Elinor Mills Abreu in San Francisco)

© Reuters