Khan: OT, re Oracle:
I hope you ignored my recent advice, and bought Oracle. I'm just hoping this indicates Y2K is going to have a negligible effect on corporate software buying plans, so my SAP does well. Article:
June 16, 1999
Oracle Says Profit Rose 31%
In Its Fiscal Fourth Quarter
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
Oracle Corp. said strong sales of its key database-software line caused net income to handily beat expectations, easing Wall Street's fears about the bellwether technology company's outlook.
For its fiscal fourth quarter ended May 31, the Redwood Shores, Calif., software company reported net income of $527.4 million, or 36 cents a diluted share, up 31% from the $402.8 million, or 27 cents a diluted share, of a year earlier. Analysts had expected the company to earn 32 cents a share, according to First Call. Sales rose 22% to $2.94 billion from $2.41 billion.
The quarter is traditionally the strongest for Oracle, whose database and related product lines make it the world's second-largest software company after Microsoft Corp. But after Oracle reported slower-than-usual growth for its fiscal third quarter, there were widespread concerns that it might disappoint investors again this time.
Shares of Oracle surged Wednesday, rising $7.8125, or 31%, to close at $32.9375 on the Nasdaq Stock Market. Analysts at Goldman Sachs & Co., Merrill Lynch & Co. and others raised their ratings on the stock before the market opened.
Wall Street jitters increased earlier Tuesday, when the company confirmed that it plans to eliminate about 325 employees, or less than 1% of its work force of about 43,000, as it reorganizes operations to take advantage of the Internet. In Nasdaq Stock Market trading Tuesday before its results were announced, Oracle's shares dipped $1.3125, or 5%, to $25.125.
But after the release of the quarterly report, shares rose in after-hours trading to $29.50.
In the most telling statistic, the company said database sales rose 25%, a figure well ahead of the 20% increase that even the most optimistic analysts had been expecting. "That's a huge surprise," said Rob Tholemeier, with the FAC/Equities division of First Albany Corp. "They found business that no one knew was out there."
Puzzled Analysts
Some analysts were puzzled by Oracle's strong showing, since the company had spent the last few weeks advising them to be cautious in their forecasts. Some even complained privately that Oracle had deliberately lowered expectations to get a spike in the stock when it surprised them with the good news. Indeed, shares are expected to be up again Wednesday as a result of the earnings release.
Jeffrey O. Henley, the company's chief financial officer, said in an interview that Oracle had been forced to be conservative by the uncertainties associated with the year 2000 date change. The Y2K problem has forced many corporate computer buyers to evaluate their product plans, and a Y2K-related slowdown has hurt Oracle competitors in business application programs that run along with databases.
But Mr. Henley said that in the end, database sales growth returned to its historic pattern. He also said that sales across the company's businesses looked as if they were going to hold up well during the next few months. "We feel very good," he said.
While other parts of Oracle's business did not show the surprising strength of its database line, they still had numbers that analysts considered respectable. Sales of the company's application programs, which have been erratic for several quarters, grew 28% from the year-earlier period. Oracle's revenue from consulting services rose 22%.
Role in E-Commerce
Oracle has embarked on an all-fronts campaign in recent weeks to get both investors and business customers excited again about the company, with executives frequently mentioning the role that Oracle's software plays in Internet e-commerce sites.
After Tuesday's announcement, Oracle Chief Executive Lawrence Ellison boasted in a news release that the company was growing faster than application-software rivals such as SAP AG and PeopleSoft Inc. He also said that Oracle's database product line was holding its own against onslaughts from both Microsoft and International Business Machines Corp.
But analysts noted that sales to conventional customers like banks still account for a much bigger portion of Oracle's revenue than new e-commerce applications. And they still have some near-term concerns, including whether Oracle's aggressive sales force can continue to operate at the intensity apparent during the most recent period.
"The fourth quarter is an important one for Oracle, and they always work hard to pull it off, with the phone lines open until midnight," said Robert Austrian of NationsBanc Montgomery Securities. "They'll sprint to the finish, and then have to go to the off-season for a bit of recuperation."
Another concern was whether Oracle, and other companies, might be undone later in the year, should companies slow their spending because of year-2000 preparations. But Rick Sherlund of Goldman, Sachs said that the strong database business at Oracle was an indication that the corporate software market might not see a Y2K-related slowdown after all.
|
