Database demand pushes up Oracle profits
Published: 15 Sep 2004 09:15 BST
Oracle reported a 16 percent rise in first-quarter profits on Tuesday, citing strong demand for its database software.
In the fiscal first quarter ended 31 August, Oracle posted $509m (£284m) in net income, a 16 percent jump over the same period last year. The company earned 10 cents a share on $2.2bn in revenue, lifting its earnings per share by 18 percent and its revenue by 7 percent year over year.
Oracle increased its new licence revenue -- a key growth metric -- by 7 percent 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 percent, 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.
Oracle chief financial officer Harry You issued a second-quarter forecast during the teleconference, predicting that the company would grow revenue by 3 percent to 7 percent compared with the same period last year, while new licence revenue would either decline by as much as 2 percent or grow by as much as 8 percent. He said earnings per share would hit 13 cents in the second quarter, which ends 30 November -- a 12 percent increase year over year.
Questioned about the possible decline in second-quarter new licence revenue, the chief financial officer said the company may face a number of potentially disruptive situations, including a possible "pause" in business spending due to the U.S 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 chief financial officer.
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.
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