Oracle New Product Sales May Be Hurt by Dollar, Slump in Europe

Oracle Corp., the software maker whose international orders buoyed revenue this year, may report smaller growth in sales of new programs after the U.S. dollar advanced and European clients curbed spending.

Sales of software licenses probably came in at the low end of Oracle's goal of $1.2 billion to $1.3 billion in the first quarter ended Aug. 31, six analysts interviewed by Bloomberg said. The increase could be as little as 10 percent, two-thirds less than the year-earlier gain.

Companies abroad are joining U.S. customers in cutting budgets to cope with an economic slowdown, removing a shield that Chief Executive Officer Larry Ellison used to protect Oracle's results in the past. More than half of Oracle's total revenue comes from overseas, and those sales rose almost twice as fast as sales at home during the fiscal fourth quarter.

``Europe is in the tank,'' said Jeff Markunas, who helps manage $1.2 billion as portfolio manager for RidgeWorth Large Cap Core Equity Fund, which owns 900,000 shares of Oracle, in Richmond, Virginia. ``Companies there are beginning to trim discretionary spending.''

The dollar has gained as economies from Europe to Japan cooled and crude oil dropped more than 30 percent from its peak of $147.27 a barrel. The U.S. currency has risen 11 percent from its record low of $1.6038 per euro July 15.

Oracle, the second-biggest software maker after Microsoft Corp., had forecast that converting the euro and other currencies to the dollar would boost revenue by 5 basis points, or 0.05 percentage point.

Dollar Gains

Instead, the dollar's increase means the lift probably will be 2.5 basis points, said UBS AG's Heather Bellini in New York, ranked as the top software analyst by Institutional Investor magazine. She projects as much as $1.23 billion in new license sales, a barometer for future revenue from upgrades and maintenance fees.

Redwood City, California-based Oracle plans to report earnings today after the markets close. Total revenue probably gained 19 percent to $5.45 billion, based on the average estimate of 19 analysts surveyed by Bloomberg. Profit excluding buyout and stock-option costs probably rose to 27 cents a share.

Oracle spokeswoman Deborah Hellinger didn't return a phone call and an e-mail seeking comment.

Oracle fell 86 cents to $18.10, an 18-month low, in Nasdaq Stock Market trading yesterday. The shares have lost 20 percent this year, compared with a 25 percent drop for the Standard & Poor's 500 Information Technology Index.
`Weaker End'

Almost half of large companies worldwide cut their technology budgets for the next 12 months, Forrester Research Inc. said in a report published this month.

``It was a weaker end to the quarter than people had anticipated,'' said Brendan Barnicle, an analyst with Pacific Crest Securities Inc. in Portland, Oregon.

License sales advanced 35 percent in the year-earlier quarter, boosted mostly by Ellison's $34.5 billion in acquisitions, Barnicle said. Typical growth rates for big technology companies are less than 20 percent, and Oracle will return to that pace, he said.

Ellison's 44-company buyout spree almost doubled revenue and pushed Oracle beyond database software. The company now sells programs to run tasks from human resources to analyzing internal operations, manufacturing and merchandising. The purchases helped Oracle overtake International Business Machines Corp. last quarter as the second-biggest software maker.

The company's variety of products still may guard Oracle from a sinking economy in the long run, Goldman, Sachs & Co. analyst Sarah Friar said in an interview from San Francisco.

``Customers are working with fewer vendors, and that's helping Oracle because they have so much they can sell,'' Friar said. ``Software spending is stronger than technology overall, and Oracle spending is stronger than software.''

To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net