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Oracle net profit down in key Q4

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CIOL Bureau
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Lisa Baertlein

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PALO ALTO: Oracle Corp. on Tuesday reported a 23 per cent drop in earnings

for its fiscal fourth quarter as revenue at the world's No. 2 software company

fell from the year-earlier level for the first time in its history.

Even so, Oracle's operating earnings, excluding charges, surpassed analysts'

lowered estimates and sparked an after-hours rally in the stock, which had hit a

multiyear low during the quarter that is traditionally Oracle's most important

for sales.

Oracle shares jumped above $10 on Instinet from their Nasdaq close of $8.98.

The stock gave back some of those gains to settle around $9.36 after Oracle's

chief financial officer Jeff Henley said software sales in Oracle's current

first-quarter could be off as much as 25 per cent from the year-earlier level.

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"What we're seeing is a bad, but steadily bad IT spending environment,

not a collapsing spending environment," said Charles Di Bona, software

analyst at Sanford C. Bernstein & Co., which does not have an investment

banking business.

Oracle, which grew like gangbusters during the dot-com and telecom craze, has

been battling company-specific issues in recent quarters while holding down

expenses.

Among other things, International Business Machines Corp. and Microsoft are

turning up the heat in Oracle's key database market, which contributed about 80

per cent of company revenue in fiscal 2002. Oracle also is battling back after

releasing software to automate accounting, human resources and other activities

before it was mature.

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But, analysts said, the problem is not just Oracle. "A lot of what's

going on here 'is the economy, stupid,'" Di Bona quipped, borrowing a

popular campaign pitch from former President Bill Clinton.

New software sales strong



Redwood Shores, California-based Oracle said its fiscal fourth-quarter net
income fell 23 per cent from a year earlier to $655.9 million, or 12 cents per

share.

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Total revenues in the period ended May 31 were $2.77 billion, down nearly 19

per cent from a year ago, but better than analysts forecasts for sales of

between $2.4 billion to $2.75 billion, according to research firm Thomson First

Call.

"They're surprisingly strong numbers," said Merrill Lynch analyst

Chris Shilakes. "These were close to the numbers that people were looking

for before all the estimate reductions began. We've kind of come full circle

here with these results," he said.

New software sales, a key driver of future growth, landed at a

better-than-expected $1.15 billion as database revenue dropped 29 per cent from

a year ago at $904.3 million. Applications -- or software that automates such

things as accounting and customer service -- was down 27 per cent from a year

ago at $245.7 million, though it rose from the prior quarter.

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Excluding a $173.5 million impairment charge from Oracle's investment in

Liberate Technologies, the company's fourth-quarter profit was $760 million, or

14 cents a share. That result edged past analysts' forecasts for earnings of 10

cents to 13 cents a share, according to First Call.

Not out of the woods



"We don't think we're out of the woods yet. We think that IT spending
is still very tightly constrained," said Jim Mendelson, a software analyst

at SoundView Technology Corp.

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Oracle chief executive Larry Ellison agreed. "The really big deals are

few and far between these days," Ellison said during a conference call with

analysts.

To that end, Henley said current-quarter software sales could fall 15 per

cent to 25 per cent from a year ago, resulting in per-share earnings of 7 cents

a share -- or 6 cents in the worst case. Oracle had a 9-cent per share profit in

the first quarter of fiscal 2002 and reported new software sales of $711.1

million.

Henley also said the company sees "marginal single-digit revenue

growth" for fiscal 2003. "Our assumption is that there will be

positive improvement, primarily in the second half, which will lift the full

year," he said.

(C) Reuters Limited.

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