Oracle Profit Meets Estimates as Clients Start Buying Software Again
By Rochelle Garner
March 25 (Bloomberg) -- Oracle Corp., the world’s second-largest software maker, reported third-quarter profit that met analysts’ estimates after customers bought programs they had delayed purchasing during the recession.
Profit before acquisition and some other costs was 38 cents a share in the period ended Feb. 28, the company said today in a statement. That matched the average of analyst estimates in a Bloomberg survey. Including deferred revenue from Sun Microsystems Inc., which Oracle acquired in January, sales were $6.47 billion. Analysts estimated $6.32 billion.
Chief Executive Officer Larry Ellison, 65, has spent $41.8 billion buying 62 companies since to add customers and products, including business applications and tools that make disparate pieces of software work together. License sales rose 13 percent to $1.72 billion as companies renewed spending.
“Those license numbers tell you things are looking up in the enterprise space,” said David Rudow, a Minneapolis-based analyst with Thrivent Asset Management, which owns more than 3.7 million Oracle shares. “The acquisitions they’ve done in middleware are paying off. These are programs for the data center that you have to spend money on to run your business better.”
Oracle, based in Redwood City, California, fell 27 cents to $25.77 in late trading at 5:08 p.m. New York time. Earlier the shares rose 28 cents to $26.04 in Nasdaq Stock Market trading. They have advanced 6.2 percent this year through the Nasdaq close.
Net Income Slips
Net income fell to $1.19 billion, or 23 cents a share, from $1.33 billion, or 26 cents, a year earlier. Revenue before adjustments increased to $6.4 billion.
Goldman Sachs expects global technology spending to rebound this year, increasing 5 percent. Large companies in the U.S. will provide a “modest” contribution to total revenue growth, the firm estimates.
To maintain growth, Ellison set Oracle on an acquisition spree that moved the company beyond its database software. Today the company competes against SAP AG, the world’s biggest maker of business-management software, handling tasks such as accounting, inventory and human resources.
In 2008, Oracle acquired BEA Systems Inc., stepping up its challenge against International Business Machines Corp. in the market for so-called middleware, or software that helps different kinds of programs share information.
‘Vast Portfolio’
“Their vast portfolio is helping them compete better,” said Jeff Gaggin, a New York-based analyst with Avian Securities Inc. “The rebound in the economy is definitely helping their growth.” He has a “positive” rating on the shares, and doesn’t own them.
With the $7.4 billion acquisition of Sun, Oracle gained the fourth-biggest maker of server computers, marking Oracle’s entrance into the hardware market. Oracle has said it will get out of Sun’s low-margin, high-volume server business -- focusing instead on more profitable, high-performance servers.
“A lot of companies have their moment where everything comes together but aren’t able to move forward as some new platform takes hold,” Tony Ursillo, an analyst with Loomis Sayles & Co., said in an interview from Boston. “Oracle, led by Larry Ellison, continues to have good visibility into how technology is evolving and then maintains its relevance in that evolving world.” Loomis Sayles owned 6.1 million Oracle shares as of Dec. 31, according to Bloomberg data.
Oracle trails Microsoft Corp. in software revenue.
To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net
Last Updated: March 25, 2010 17:08 EDT |
