Oracle Corp, the world's third-largest software maker, reported a 25 percent rise in quarterly profit on Thursday, but forecast slower growth in sales of new software in the current quarter.
While Oracle's earnings and revenue beat expectations for its fiscal first quarter ended August 31, Chief Financial Officer Safra Catz said she expects sales from new software licenses to climb only between 15 and 25 percent in the second quarter.
That would be slower than the first quarter's 35 percent growth to $1.1 billion.
In previous quarters management has been relatively aggressive in guidance. Now they're suddenly conservative, said Martin Schutz, an analyst with Hochfeld Independent Research Group.
He added: The question is: Is there something in the environment that is causing them to be conservative? Was there something in the latest quarter that caused them to be conservative?
Oracle shares rose 1.7 percent after the results but erased gains following the outlook.
Still, the stock was up 6 cents at $21.10 in late after-hours trading, just a tad shy of its year-high of $21.31 earlier in the day. Oracle shares have risen 21 percent so far this year, buoyed by the company's strong software sales.
Net income jumped to $840 million, or 16 cents per share, in the fiscal first quarter, from $670 million, or 13 cents, a year earlier.
Catz said during a conference call with analysts that Oracle is winning market share in all product categories.
Oracle is the leader in database software, ahead of International Business Machines Corp. It is No. 2 in business applications, behind Germany's SAP AG.
Revenue rose 26 percent to $4.53 billion, beating the average analyst target of $4.36 billion, according to Reuters Estimates, whose data showed that Oracle's revenue has beat expectations for seven straight quarters.
Earnings, excluding items such as stock-based compensation expenses and acquisition-related charges, were 22 cents per share, a penny above the average Wall Street expectation. Oracle's profit excluding items had beat for six of the last seven quarters, according to Reuters Estimates.
The results were buoyed by sales of products that were not in its line-up a year ago. Oracle added them after buying Hyperion Solutions Corp, Stellent Inc, MetaSolv Inc and several other software makers over the past year.
Oracle said it expects second-quarter revenue to rise 19 to 21 percent. Analysts were looking for second-quarter revenue of $4.9 billion, which would be a 16 percent gain from a year ago, according to Reuters Estimates.
It said it saw second-quarter net profit per share at 20 cents to 21 cents, or 26 cents to 27 cents excluding special items. The average Wall Street forecast was for 26 cents excluding items.
Oracle Chief Executive Larry Ellison said he has no immediate plan to follow rival SAP in selling business management software targeted at small- to mid-sized companies.
SAP on Wednesday introduced a line of Web-based software aimed at companies with 100 to 500 employees.
The CEO of Oracle, whose software is designed for large corporations, said it would be too expensive to develop products for smaller businesses.
We've looked at going down-market. We've looked very closely at it, Ellison said during the conference call.
He said that the additional costs of product development, marketing and customer support make the profit margins on such a profit unattractive.
We'll watch and see how SAP does going after small companies ... It's interesting ... But so far nobody has figured out how to make any money at it.