Oracle Profit Rises, Beats Estimates

By @ibtimes on

Oracle Corp. (NASDAQ: ORCL) the world's third largest software maker, reported profit that beat Wall Street expectations on Tuesday and gave a positive growth outlook for the current quarter that nudged its shares higher.

Fourth-quarter sales of new software rose 17 percent from a year ago to $2.5 billion. Analysts had expected growth of 13 percent to 14 percent in new software sales, one of the most closely watched indicators of Oracle's financial performance.

Oracle executives said the company was taking market share from rivals International Business Machines Corp., SAP AG and BEA Systems Inc..

It marked the third time that earnings topped Wall Street forecasts in the fiscal year that ended May 31.

They're firing on all cylinders, said Martin Schutz, an analyst with Hochfeld Independent Research.

Chief Financial Officer Safra Catz forecast that new software sales would rise between 20 percent and 30 percent in Oracle's fiscal first quarter, more than double the pace Wall Street analysts were expecting.

She said that forecast was conservative and that it excludes sales of its Agile software unit. Oracle estimates non-GAAP revenue will rise by 18 percent to 20 percent during the first quarter.

We're obviously looking for it to be our largest Q1 ever, Catz said on a conference call with analysts. We're delivering earnings growth way ahead of our target.

Analysts attribute the company's strong performance to the success of Chief Executive Larry Ellison in integrating the assets of more than $20 billion worth of acquisitions he has acquired since 2005 into the company's product portfolio.

I expected the pace to continue, Ellison said of his plans for future purchases in a conference call with analysts.

Cowen & Co. analyst Peter Goldmacher said that the company's salesforce has done a good job of selling multiple products to customers once they close a deal on one piece of software.

These guys are becoming the Costco of software, Goldmacher said. When you go to Costco, you need one box of plastic bags. But you might end up getting eight boxes.

Programs designed to handle particular tasks unique to companies in specific industries -- a type of software known as vertical applications -- have proven to be effective in helping Oracle forge broader relationships with customers, Ellison said in the conference call.

When they make a decision for one of our vertical apps, it greatly enhances our opportunity to sell other things, he said. They commit really the core of their business to our software. It allows a lot of other software to be dragged along with it.

Oracle had fiscal fourth-quarter net income of $1.6 billion, or 31 cents per share, compared with $1.3 billion, or 24 cents, a year ago. Revenue rose to $5.83 billion from $4.85 billion.

Excluding items, quarterly earnings totaled 37 cents, beating the average analyst forecast of 35 cents.

The results were buoyed by sales of products that were not in the product lineup a year ago. Oracle added them when it bought Hyperion Solutions Corp., Stellent Inc., MetaSolv Inc. and several other software makers over the past year.

Shares of Redwood City, California-based Oracle rose to $19.40 after issuing its earnings forecasts, after initially slipping 2 percent from its close at $19.16 on Nasdaq.

Oracle also said it expects first-quarter earnings of 21 cents per share, excluding items. That is in line with the average of analysts' forecasts, according to Reuters Estimates.

Oracle was trading at about 17 times the average forecast for next year's earnings per share, in line with the future price-to-earnings ratio for Microsoft Corp. Technology services company IBM, the No. 2 software maker, trades at 14 times.

Oracle is the leader in databases, ahead of IBM, and No. 2 in business applications behind SAP, which trades at 20 times estimated 2008 earnings.

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