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Follow UsLisa Baertlein
REDWOOD SHORES: Oracle Corp., the world's No. 2 software vendor, on Thursday
posted fiscal second-quarter earnings that were down from a year ago, but said
it expects profit growth to resume in its fourth quarter ended May.
Oracle stock, which finished the regular Nasdaq session down 43 cents at
$14.67, shed more than 40 cents in extended trade on Instinet following the
company's earnings announcement. The stock then popped above $15 after company
executives issued their outlook and said they believed business had bottomed in
the recently completed quarter.
The Redwood Shores, California, database software giant had net income of
$549.5 million, or 10 cents per share, compared with $622.8 million, or 11
cents, in the year-earlier quarter ended Nov. 30 -- earnings that were in line
with lowered estimates from Oracle and Wall Street analysts.
The company's total revenue declined to $2.4 billion from $2.7 billion,
falling short of Wall Street's consensus estimate for revenue of $2.5 billion.
Oracle, which consistently has held down expenses despite recently softening
sales, also saw its second-quarter operating margins slightly erode from last
year's levels.
"It was our toughest quarter in a decade ... When the economy improves,
we will earn a lot more," Oracle Chief Executive Larry Ellison said.
"We think the business has hit bottom ... things have stabilized and things
are getting better slowly," Ellison said during an interview with Reuters
Television.
Oracle Chief Financial Officer Jeff Henley forecast third-quarter earnings of
10 cents a share, flat compared with the year ago, and fourth-quarter results
that are 2 cents to 3 cents better than the 15-cent profit Oracle reported in
the year-ago period.
"Our fiscal third quarter will be better than our fiscal second quarter,
not wildly," Henley told Reuters.
The good, the bad, and the horrible
During the second quarter, Oracle grappled with global recession and the Sept.
11 air attacks that brought US business to a standstill.
"The bad news is that the quarter is about the worst they've ever had
... The good news is, even in this horrible environment, their cash flows and
margins are extremely strong," Bob Austrian, an analyst at Banc of America
Securities, said.
Software license revenues, a key measure of a software company's performance,
posted a larger-than-expected decline of nearly 27 per cent from last year as
database sales fell 21 per cent and revenue in Oracle's newer applications
business was down 42 per cent.
The company is in the grip of an intense rivalry with computer and services
giant International Business Machines Corp. and recently has been busy refuting
assertions that it is losing customers in its flagship database business to IBM
and Microsoft Corp.
"We are not losing market share at all," said Ellison. "We are
gaining market share in our primary database business." Oracle shares are
down 48 per cent year-to-date, while the stock of No. 1 software maker,
Microsoft Corp., is up nearly 57 per cent during the same period.
"They need to begin to show some revenue growth here to get people
excited about moving into the stock," said Merrill Lynch analyst Chris
Shilakes. According to company forecasts, that revenue growth is not likely in
Oracle's current fiscal year.
Henley told Reuters that he expects third-quarter revenues to show a
percentage decline "in the high teens" and said the company has a
"shot" at flat license revenue growth in the fourth quarter.
Shilakes, who noted that Oracle's year-over-year earnings comparisons will
get easier in the coming quarters, said that corporations are likely to be
cautious about making technology investments until their own profits expand.
"(Oracle's) going to have to wait for a rebound in spending," he said.
(C) Reuters Limited.