Oracle posts strong gains, alleviating investor concern

Business software maker Oracle Corp. on Wednesday posted a 35% gain in second-quarter profit, topping Wall Street's expectations and alleviating the concerns of investors looking at the company as a gauge of the broader tech market's health.

Oracle said net income for the period ended Nov. 30 rose to $1.3 billion, or 25 www.cents a share, from $967 million, or 18 cents a share, in the same period a year earlier. Meanwhile, revenue rose to $5.3 billion from $4.16 billion.
Excluding special items, Oracle said earnings for the quarter were 31 cents a share. Analysts polled by Thomson Financial had been estimating Oracle would post earnings of 27 cents a share, on $5.04 billion in revenue.

Oracle Chief Financial Officer Safra Catz said in a prepared release that the results came thanks to "strong revenue growth across all product lines and geographies."
Oracle said sales of new software licenses grew 38% over the period a year earlier, marking the strongest quarterly increase in the past 10 years.

Analysts closely monitor Oracle's sales of new licenses to help them gauge the company's ability to wrangle new business, rather than depending on revenue drawn from maintaining and updating software already sold to existing customers.
Shares of Oracle jumped nearly 5% in after-hours trading to $21.73 following the company's quarterly earnings announcement.

Investors and analysts are especially interested in the health of Oracle's business now that the overall economy has faltered. Some have wondered whether the tough times will translate into fewer sales of Oracle's software to its many large customers in the financial, retail and other industries.

But Wednesday's results seemed to address those concerns in a resounding manner.
Oracle said its sales of new software application licenses grew 63% in the period compared to a year earlier.
Oracle's applications software is of particular interest to analysts, as the company has sought to build up its applications business in recent years -- mainly via acquisitions -- in order to provide a balance to its traditional database software business.
The increased emphasis on applications software has also drawn Oracle into tighter competition with German rival SAP AG.

SAP is expected to report fourth-quarter results in January.
Maintenance revenue has been a key point of contention between Oracle and SAP. An SAP subsidiary called TomorrowNow was attempting to undercut Oracle's lucrative product support business by pilfering documentation and offering cut-rate service for Oracle products, according to a lawsuit filed earlier this year by Oracle.
For its second quarter, Oracle said revenue from software license updates and product support grew 3%, to $2 billion.

Author: John Letzing @ www.marketwatch.com

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