Strong results seen for Oracle

Oracle Corp. is expected to post strong gains in first-quarter profit and sales when it reports results next week, despite tough year-over-year comparisons and concerns about the impact of the credit crisis on the business software maker.

Analysts polled by Thomson Financial expect Oracle to post earnings excluding certain items of 21 cents a share, and $4.3 billion in revenue. That compares to earnings of 18 cents a share, and $3.7 billion in revenue in the same period a year earlier. Oracle is expected to report quarterly results Thursday.
The high expectations come even as Redwood Shores, Calif.-based Oracle's numbers for the period ended in August will be compared to a very strong quarter a year earlier, when the company beat analysts' expectations and sent its shares surging higher.
In addition, questions have been raised recently about potentially weakening demand for the software that Oracle sells to banks and other businesses, who have retrenched during an economic downturn.

Oracle has "enough irons in the fire to offset a tough compare" to last year's quarter, Bank of America analyst Kirk Materne said in a note released Wednesday. Materne's expectations for sales and profit are in line with those of other analysts, and he has a buy rating on the shares.
Oracle's products used by financial institutions that are suffering alongside the credit market include those developed by recent acquisition Hyperion Solutions. In addition, analysts wonder whether other companies affected by the crisis may also rein in software spending.
Materne said that while Oracle's first quarter results should not be impacted by the credit crisis, investors should pay special attention to the company's guidance, "to help gauge the impact of recent macro turmoil on enterprise spending."

"Any 'macro color' will be a focus," Materne said.

Pacific Crest Securities analyst Brendan Barnicle said in a note released last week that, "Our channel contacts continue to report that Oracle had a solid" first quarter. Barnicle has an outperform rating on the shares.

Barnicle said he was surprised to see no negative impact on Oracle's financial services software business from the credit crisis. "We did speak with some contacts who are concerned that the financial services vertical could be weak in the remainder of the year, but they had not seen weakness in" the first quarter, Barnicle said.

Of particular interest when Oracle announces results will be reported growth in sales of new software applications licenses, a closely-watched metric as the company moves further into applications to complement its traditional database software business.
In its fiscal fourth quarter, Oracle's reported 13% growth in applications license sales disappointed analysts and investors. See related column.

Oracle cited a difficult year-over-year comparison for the lackluster growth. Chief Executive Larry Ellison said at that time that he expects applications license revenue "to grow strongly" in the first quarter, compared to the period a year earlier.

Author: John Letzing @ MarketWatch.com

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