SemiOT: Oracle Overcomes Takeover Worries
Net Rises on Strong Revenue Despite Concerns by Analysts
Over PeopleSoft Fallout
By DAVID BANK
Staff Reporter of THE WALL STREET JOURNAL
June 30, 2005; Page A3
Oracle Corp. rebutted concerns about turmoil in the aftermath of its takeover of PeopleSoft Inc., reporting fiscal fourth-quarter revenue growth of 26% and raising its earnings forecast for the current fiscal year.
Net income for the quarter ended May 31 rose 3% to $1.02 billion, or 20 cents a share, from $990 million, or 19 cents a share, last year, including acquisition expenses and other charges. Excluding those charges, earnings were 26 cents a share, or three cents a share higher than an average analyst forecast reported by Thomson First Call.
Revenue rose to $3.88 billion from $3.08 billion for the Redwood City, Calif., company. Some analysts were hesitant to portray Oracle's strong results as a bellwether for the software industry.. "People are still buying much more slowly, much more carefully," said Jim Shephard, vice president of AMR Research in Boston.
Oracle forecast earnings on that basis of 78 cents to 81 cents a share for the fiscal year ending next May, up from a forecast issued in March of 64 cents to 65 cents a share. Analysts had been predicting full-year earnings of about 78 cents a share. Oracle projected revenue for the year of $14.2 billion to $14.4 billion, as much as 19% higher than the $12.1 billion reported for the fiscal year that just ended, which includes about $300 million in revenue from PeopleSoft that couldn't be claimed by Oracle under generally accepted accounting rules.
Oracle's flagship database-software business again powered results, with sales of database and so-called middleware programs up 16% to $1.26 billion.
The strength of Oracle's smaller business-applications unit, which includes the PeopleSoft product lines, was harder to determine. Oracle reported new license sales of $350 million, compared with $231 million in the same quarter last year. But in the first complete quarter that includes PeopleSoft's sales, Oracle's total was less than the combined license sales of $361 million for the two companies in the comparable periods last year.
Still the results exceeded the forecasts of most analysts, who were concerned about Oracle's ability to quickly integrate PeopleSoft's operations.
Oracle declined to break out separate results for PeopleSoft's product lines, saying the combination of the two companies' sales forces made such accounting difficult. Oracle took control of PeopleSoft in a $10.6 billion deal late last year after an 18-month takeover battle.
In a conference call, Oracle executives, including Chief Executive Larry Ellison, said Oracle is making gains against SAP AG of Germany, the largest maker of business-software applications. "We think we're gaining share in the applications business," Mr. Ellison said.
But SAP disputed the statement, and AMR's Mr. Shephard said it appears SAP is continuing to gain market share against Oracle and the rest of the industry.
Mr. Ellison also said Oracle has been taking market share from BEA Systems Inc., a San Jose, Calif., leader in programs called application servers used to make Web-based business programs. BEA has long been mentioned as a possible takeover target for Oracle. "BEA is in decline," Mr. Ellison said. May Petry, a BEA spokeswoman, disputed Mr. Ellison's claims as "fuzzy math."
In a meeting with editors of The Wall Street Journal, Mr. Ellison said Oracle is looking "very carefully at targeted acquisitions" to boost its annual earnings growth rate to 20%. He estimated Oracle's internal growth at about 15% and said Oracle is focusing on acquisitions in specific industry segments. He said the continued consolidation of the software industry is inevitable. "The end game looks like a handful of survivors," he said, ticking off his short list of industry winners. "Microsoft is clearly a survivor, Oracle is clearly a survivor, as is IBM, as is SAP. I think I'm finished."
Write to David Bank at david.bank@wsj.com9
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