Oracle said increased license revenues from existing customers and a steadily improving economy helped drive a 15 percent increase in profit in the company’s fourth quarter.
Oracle rang up a profit of US$990 million for the quarter, up from $858 million in the same quarter last year, narrowly beating Wall Street expectations and marking its sixth straight quarter of earnings growth.
The software maker’s shares fell when trading opened Wednesday, with investors looking ahead at what is typically a seasonally weak first quarter and apparently focusing on the fact that while database sales were strong, Oracle’s application business did not fare as well.
Overall, sales rose more modestly, with Oracle posting revenue gains of 9 percent over the year-ago period to $3.1 billion. Software sales rose 12 percent to $2.5 billion, while services were down 4 percent to $558 million. But Oracle said its European division posted record sales in the quarter, beating even dot-com-boom era results.
“Clearly, we are benefiting from more business optimism,” CFO Jeffrey Henley said in a conference call. The U.S. is leading an economic recovery that also boosted sales overseas, he added.
CEO Larry Ellison said Oracle is benefiting from moving quickly to offer software that enables companies to run databases on distributed computing grids rather than massive centralized processors.
“The market is just beginning the move to databases and application servers running on grids of low-cost computers and Oracle is leading the way,” Ellison said in a statement.
The firm’s application business saw a 6 percent drop, something that might be troubling to anyone thinking that the segment was going to be a driver of growth for Oracle.
Full Court Press
The earnings news came as Oracle’s courtroom challenge of U.S. Department of Justice attempts to block its takeover of PeopleSoft continued.
On Tuesday, the government released a PeopleSoft document arguing that the state of California stands to lose $1 billion by being forced to switch to new software if Oracle’s $7.7 billion merger with PeopleSoft is allowed. And an IT executive from Daimler-Chrysler testified that the car maker fears what would happen if the deal is consummated.
The earnings news does seem to put to rest, at least temporarily, fears that Oracle’s business would suffer from distraction created by its year-long quest to take control of PeopleSoft.
“The takeover and all the legal matters have created an uncertain situation for all the companies in the space,” Gartner analyst Jeff Comport told the E-Commerce Times.
The fact that Oracle continues to perform, not only by selling more software licenses but also by boosting margins — profit margins reached record levels of 46 percent, Oracle said — shows the company has not let the matter creep into its core business.
The uncertainty has been more pronounced for PeopleSoft and its customers, who could see their product lines phased out or no longer supported should Oracle take over. “You would expect Oracle’s customers to be the least nervous about what’s going on,” Comport added.
Still, the PeopleSoft fight is costing Oracle some cash. It spent $9.5 million in the fourth quarter and nearly $60 million over the course of the fiscal year on the acquisition.
Ready to Buy
Repeating earlier statements, Oracle said it stood at the ready to make acquisitions in the software space if the right opportunity came along — regardless of what happens with PeopleSoft. Oracle ended its fiscal year with $6.5 billion in cash, a war chest that Henley said the company intends to beef up going forward.
Ellison said last year that Oracle had held talks about acquiring Sun Microsystems at one point, but it was decided that the two companies worked better as partners.
Forrester Research analyst Byron Miller told the E-Commerce Times that Oracle might see a smaller acquisition as a way to reinforce its sagging application business, and a hedge against failing to close the PeopleSoft deal.
“Moving right now might further confuse the market,” Miller said. “They may wait to see how things develop first.”