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Oracle's earnings top analyst expectations

Oracle Corp. kicked off its new fiscal year with its biggest increase in software sales since the dot-com boom, propelling a first-quarter performance that topped analysts' expectations.
/ Source: The Associated Press

Oracle Corp. kicked off its new fiscal year with its biggest increase in software sales since the dot-com boom, propelling a first-quarter performance that topped analysts' expectations.

The Redwood Shores-based company said Thursday it earned $840 million, or 16 cents per share, for the three months ended Aug. 31. That represented a 25 percent improvement from net income of $670 million, or 13 cents per share, at the same time last year.

If not for stock option expenses, Oracle said it would have made 22 cents per share — a penny above the average estimate among analysts polled by Thomson Financial.

Revenue for the period totaled $4.53 billion, 26 percent above last year's $3.59 billion and easily surpassing the average analyst estimate of a $4.34 billion. If not for a weak dollar that bolstered international sales, Oracle said its first-quarter revenue would have been up by 22 percent.

Perhaps most importantly to investors, Oracle's sales of new software licenses climbed 35 percent to $1.09 billion, soaring past both management and analyst projections. Analysts had been anticipating an improvement in the mid-20 percent range.

The spike in Oracle's first-quarter software sales was the largest since free-spending Internet startups were driving demand in 2000, said Safra Catz, the company's chief financial officer.

The first-quarter gains included about $87 million in sales from two recently acquired companies, Hyperion Corp. and Agile Software Corp., whose products weren't sold by Oracle last year.

Wall Street focuses on software sales because the new licenses establish a pipeline for future revenue from product upgrades and maintenance.

Oracle shares reached a new 52-week high of $21.31 Thursday before falling back to finish the regular session at $21.04. The stock added 6 cents in extended trading after the company released its first-quarter report.

"It was a strong quarter across the board," said Piper Jaffray analyst Ajaykumar Kasargod. "The (sales) execution is really coming along."

Catz predicted Oracle's momentum will continue in the current quarter. She forecast the company's software sale will rise by 15 percent to 25 percent in the three months ending in November to produce earnings of 26 cents or 27 cents per share, excluding stock option expenses.

The first quarter is usually Oracle's weakest sales period because so many key decision makers take summer vacations.

"If things weren't going well, this is where you would see it," Catz told analysts during a Thursday conference call.

August looked like it might be even more challenging this year as a worsening credit crunch triggered by the slumping real estate market roiled the stock market and raised concerns about both consumers and businesses curtailing their spending.

But the worries apparently didn't stop companies, schools and government agencies from buying Oracle's software.

The first-quarter performance extended a prosperous stretch that has justified an expensive expansion launched in 2004.

Hoping to build upon the company's dominance in database software, Oracle has spent about $25 billion on more than 30 acquisitions in the past three years. The shopping spree has primarily been aimed at luring customers away from SAP AG, the leading seller of business applications software that helps companies manage their operations.

During the first quarter, Oracle's sales of applications software rose 65 percent to $376 million.

Oracle also is making significant inroads in middleware software _ coding that help the applications to work more effectively with the database software. The company's sales of database and middleware software increased 23 percent during the first quarter to $711 million.

"I would say that in the last 12 months, Oracle has certainly established itself as a much more viable software provider," said AMR Research analyst Bruce Richardson.