Oracle Profit Tops Estimates, Boosted by Sun Purchase (Update2)
By Rochelle Garner
June 24 (Bloomberg) -- Oracle Corp., the world’s second- largest software maker, reported fourth-quarter profit that beat analysts’ estimates as customers resumed buying programs after the recession and renewed support contracts.
Profit before acquisition and other costs was 60 cents a share in the period ended May 31, Redwood City, California-based Oracle said today in a statement. That exceeded the 54-cent average of analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Larry Ellison, 65, has spent about $42 billion buying 67 companies since January 2005. That spree, including the $7.3 billion purchase of Sun Microsystems Inc. this year, pushed Oracle beyond its hallmark database software. The economic rebound is spurring customers to buy more kinds of Oracle programs even as they pay maintenance fees for software they already own.
“The economy is improving a lot, and Oracle nearly every quarter sees more synergy from all of the acquisitions it’s made,” said Tony Ursillo, an analyst at Loomis Sayles & Co. in Boston, which owns about 7 million Oracle shares.
Oracle gained 3.9 percent to $23.08 in after-hours trading, after falling 46 cents to $22.22 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has lost 9.4 percent this year.
Net income rose 25 percent to $2.36 billion, or 46 cents a share, from $1.89 billion, or 38 cents, a year earlier.
Sun Profitable
Sun added more than $400 million to earnings excluding some items, Oracle President Safra Catz said in the statement. “We have increased confidence that we will meet or exceed our goal of Sun contributing $1.5 billion” to earnings in the 2011 fiscal year, she said.
“Sun is now profitable, giving them some pretty amazing operating margins,” Sarah Friar, an analyst at Goldman Sachs Group Inc. in San Francisco, said in an interview. Oracle’s operating margin excluding some items of 46 percent topped Friar’s estimate of 40.1 percent.
The company reports sales that include deferred revenue from acquired companies, and doesn’t conform to generally accepted accounting principles. On that basis, sales rose to $9.63 billion. Analysts estimated $9.49 billion.
Goldman Sachs predicts global technology spending will rebound this year, increasing 5 percent. Large companies in the U.S. will provide a “moderate” contribution to total revenue growth, Goldman said.
Sun-Related Costs
Oracle 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 bought 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.
With Sun, the No. 4 maker of server computers, Oracle entered the lower-margin hardware business. Oracle said this month it will incur as much as $1.15 billion in restructuring costs for job cuts and streamlining operations. The company originally estimated $325 million in expenses.
This was the first full period to include Sun sales. It’s also Oracle’s fourth quarter, when sales representatives push to make year-end budgets.
“You never want to bet against Oracle in their fourth quarter,” said Brent Thill, a San Francisco-based analyst for UBS AG. “Customers know the sales guys need to make their quota, and that’s when they can negotiate their best prices.” He recommends buying Oracle shares and doesn’t own any.
Sales of new software licenses, a key indicator of future growth, rose 14 percent to $3.14 billion. Excluding the effect of currency fluctuations, new license revenue rose 15 percent.
Oracle trails Microsoft Corp. in software revenue. Catz is expected to give a forecast for the first quarter on a conference call with analysts later today.
To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net
Last Updated: June 24, 2010 16:55 EDT |
