Oracle hits Q1 targets - but only just

Oracle met Wall Street analysts' first quarter earnings estimates yesterday but predicted its revenue will continue to decline through the second quarter.

Excluding one-time costs - which include losses from an investment in Liberate Technologies - Oracle earned $386m, or 7 cents per share for the first quarter, compared with profits of $511m, or 9 cents per share, a year ago.

Financial analysts expected the company to report earnings of 7 cents a share, according to First Call. Including one-time costs, the company earned $343million, or 6 cents per share.
Revenue for the quarter ending 31 Aug fell 10 per cent, from $2.27bn a year ago to $2.03bn this year.

Oracle CFO Jeff Henley predicted a second quarter profit of 8 cents to 9 cents per share with overall revenue down 4 per cent to 7 percent. He expects new software licence sales to drop 10 per cent to 15 per cent.

Henley said the company would continue to cut costs to try to weather the tech spending slump. He said the company cut 600 jobs in the first quarter, about 1.4 per cent of the company's total work force of about 42,000 people. The company expects to cut another 500 to 600 jobs in the second quarter, mostly in international divisions, he said.

"Visibility beyond the upcoming quarter is minimal... Our assumption for the second half of the year [is that] we will see improvement," Henley said. "I hope we will start seeing positive, although modest, licence growth in the second half. Our assumption throughout the next quarter [is] we don't expect sharp improvement."

Oracle shares were down on the news, falling to $8.41 in after hours trading, according to the latest numbers on the Island ECN website. They closed at $9.03, down 25 cents from before the company announced quarterly results.

Henley said international sales, particularly in Europe and Asia, were hit hardest in the first quarter. Revenue from new software licences and renewals from database, application server software and business application software fell 9 per cent to $1.2bn. Excluding revenue from renewals, however, new software licence revenue fell 23 per cent. Product support revenue was down 1 per cent to $349m.

Consulting revenue fell 18 per cent to $432m, and education sales dropped 28 per cent to $63m.

New first quarter sales of database software fell 9 per cent year over year to $921 million, while business application software revenue fell 8 percent year over year to $246.5 million, Oracle executives said.

Oracle Chief Executive Larry Ellison said the company continues to gain new customers with its technology and he expects half of Oracle's overall database customers to upgrade to Oracle's 9i database this year. The company released the second version of the 9i database earlier this summer.

Ellison also said 1,000 customers have purchased Oracle's highly marketed database clustering technology, called Real Application Clusters. Some 100 customers are using it on computing systems now, with a quarter of them using it on the Linux operating system. Clustering allows businesses to harness multiple servers to run a large database, allowing servers to share work or take over from one another if one fails.