Strong Sales of Software Lift Oracle’s Net Income

Posted by SM Maulana

By LAURIE J. FLYNN

SAN FRANCISCO — Oracle sounded a warning bell that growth was likely to slow in the first quarter as the company absorbed its latest major acquisition, BEA Systems.


BEA Systems

Oracle, the second-largest independent software company after Microsoft, did however ease investors’ concerns about weaker corporate sales by reporting that net income in its fourth quarter, which ended May 31, rose 27 percent, to $2.04 billion or 39 cents a share on strong software sales.

The company said that revenue climbed 24 percent to $7.2 billion, from $5.8 billion in the quarter a year ago. Sales of new software licenses rose 27 percent to $3.1 billion, from $2.5 billion. Oracle’s growth improved in the United States, with new license sales rising 22 percent.

“These strong results indicate that Oracle’s hard-charging sales culture and diversified product lineup are paying off, even in challenging economic times,” said Andy Miedler, an analyst with Edward Jones.

Analysts had not expected Oracle to do as well as it did. Shares of Oracle fell 78 cents, or more than 3 percent in after-hours trading Wednesday, after the report was released. Earlier in the day, its shares rose 32 cents, or 1.4 percent, to $22.55.

Investors were reacting to the company predicting that because it had strong growth in the first quarter a year ago, by comparison, growth in the current quarter may look weak.

Safra A. Catz, Oracle’s chief financial officer and co-president, told investors in a conference call Wednesday that she expected software license growth in the current quarter of only 10 to 20 percent, but that over all she was “confident about Oracle’s prospects.” She said that in last year’s first quarter, new license growth jumped 35 percent.

“We are aware of the broader economic environment in which we operate, and we can’t predict the economy from one quarter to the next,” Ms. Catz said.

Total revenue should rise 18 percent to 20 percent in the first quarter, compared with the same period a year earlier, Ms. Catz said. Oracle expects first-quarter earnings of 26 cents to 27 cents a share, before one-time items, Ms. Catz said.

Charles E. Phillips, co-president of Oracle, said the company was taking market share from its competitors, particularly SAP, the big German software maker and Oracle’s chief rival. “This is the third consecutive year we’ve taken applications market share from SAP,” he said.

During the fourth quarter, the company closed its $8.5 billion acquisition of BEA Systems, a move that expands Oracle’s software offerings and makes Oracle one of the largest publishers of corporate software known as middleware, one of the industry’s fastest growing segments. Middleware programs operate between a company’s database system and its payroll, inventory and other business management systems that use the data.

Oracle has spent $35 billion buying rivals during the last four years in an effort to broaden the range of industries it can sell to. The strategy has been largely successful as corporate buyers increasingly look to buy multiple components from the same vendor.

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