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Corporates line Oracle's pockets for bumper first quarter
Have Bush and Kerry got Ellison running scared?

By Alorie Gilbert

Published: Wednesday 15 September 2004

Oracle has reported a 16 per cent rise in first-quarter profits, citing strong demand for its database software.

In the fiscal first quarter ended 31 August, Oracle posted $509m in net income, a 16 per cent jump over the same period last year. The software maker earned 10 cents a share on $2.2bn in revenue, lifting its earnings per share by 18 per cent and its revenue by seven per cent year over year.

Oracle increased its new licence revenue - a key growth metric - by seven per cent in the quarter, to $563m, led by strong sales of the latest version of its database software, called 10g. Sales of business-management applications fell by 36 per cent, to $69m, continuing a trend of weakness in that segment for Oracle.

Speaking on an analyst teleconference, Oracle executives said the company's applications division suffered from particularly weak demand in Europe and from aggressive discounting among rivals. The company is redoubling its efforts in that market, said Charles Phillips, Oracle co-president.

The company beat analyst estimates by a penny. Analysts polled by Thomson First Call expected Oracle to report a profit of 9 cents on revenue of $2.23bn.

Oracle Chief Financial Officer Harry You issued a second-quarter forecast during the teleconference, predicting that the company would grow revenue by three per cent to seven per cent compared with the same period last year, while new licence revenue would either decline by as much as 2 per cent or grow by as much as 8 per cent. He said earnings per share would hit 13 cents in the second quarter, which ends November 30 - a 12 per cent increase year over year.

Questioned about the possible decline in second-quarter new licence revenue, the CFO said the company may face a number of potentially disruptive situations, including a possible "pause" in business spending due to the US presidential election in November, rising oil prices, compliance-work related to new accounting regulations, and the disappearance of favourable foreign exchange rates.

Oracle chairman Jeff Henley added that information technology buyers continue to be tough customers but that things are steady.

"The economy is not changing nor worsening dramatically," Henley said on the teleconference. "Business is still decent; it's competitive. People are still cautious, but we still see real growth ahead."

Conspicuously absent from the teleconference was Oracle Chief Executive Larry Ellison, who, it was noted, would no longer take part in the company's earnings calls. Ellison is apparently delegating that task to Henley and You, who joined Oracle in July to replace Henley as CFO.

As part of Oracle's efforts to bolster its applications business, the database giant launched a hostile bid for rival PeopleSoft. The company won a victory over the Justice Department, which opposed the deal in an antitrust trial in a US District Court in San Francisco.

Oracle is encouraged by last week's ruling on the antitrust charges and hopes to complete the PeopleSoft merger within a year, executives said. "We hope to begin discussions at some point with the board of PeopleSoft," Henley said.

The software maker's shares were up 38 cents over Tuesday's closing price in after-hours trading, hitting $10.93.

Wall Street firms were eagerly awaiting Oracle's earnings as signal of how the ailing business software industry is faring after a rash of disappointing financial results in July. A handful of companies, including Oracle, have continued to grow this year.

Alorie Gilbert writes for CNET News.com