Good Morning Frank: This can't hurt the tech stocks <GG>...
<<Tuesday June 15, 10:02 pm Eastern Time
FOCUS-Oracle quarterly net easily tops estimates
By Duncan Martell
PALO ALTO, Calif., June 15 (Reuters) - Oracle Corp.'s quarterly profits handily topped lowered expectations -- climbing 31 percent -- as a rebound in sales of its database and applications software fueled results.
The second-largest independent software firm on Tuesday said net income for the fiscal fourth-quarter ended May 31 rose to $527.4 million, or 36 cents a share, up from $402.8 million, or 27 cents, a year ago. Revenue rose 22 percent to $2.94 billion from $2.41 billion.
The stronger-than-expected results, particularly in sales of software that helps companies automate manufacturing, payroll, finances and other functions, could help calm fears that Oracle would continue to suffer from a slowdown in the so-called enterprise resource planning market.
That market, where Oracle competes with SAP AG, PeopleSoft Inc., Baan Co. and others, has slowed precipitously because companies have already bought the software they need to ready themselves for the Year 2000 date change. But Oracle posted gains in the enterprise resource market in the quarter.
Analysts had expected Oracle to earn 32 cents a share, according to First Call Corp. That figure had diminished slightly after a mid-May analyst meeting.
The news sent Oracle stock as high as $28.75 in after-hours trading. On the Nasdaq, where Oracle was the most actively traded issue, Oracle had closed down $1.31 at $25.125.
On a conference call, Chairman Larry Ellison and President Ray Lane were upbeat. The strong results followed a third quarter in which new software sales were lower than expected, sending Oracle stock plunging 20 percent on March 12.
''When you blow through the numbers like that, you've got to feel pretty good,'' said analyst Christopher Shilakes, an analyst at Merrill Lynch & Co. in San Francisco, of the just-completed fourth quarter.
License revenues, or sales of new software, in Oracle's applications business jumped 28 percent to $277.2 million from last year's fourth quarter. Services related to its applications business grew 22 percent to $488.8 million.
New sales of database software, where Oracle is the biggest player, climbed 21 percent to $1.21 billion, while database services revenues increased 21 percent to $971 million.
But for investors to bid up the stock -- which is off sharply from a year-high of $41.125 -- the 22-year-old company must deliver consistent and reasonably predictable results.
''The question is how much confidence people will have in the consistency of their results, and that's a real challenge,'' said analyst Andrew Brosseau at SG Cowen & Co. ''Oracle hasn't historically had a terrific track record on that score.''
Oracle's latest database software, 8i, only started shipping in March -- about two months late -- and is now starting to kick in, Oracle Chief Financial Officer Jeff Henley said in an interview.
''We've had a good year and momentum is gaining on 8i and in our applications business,'' Henley said. ''I'm more and more confident that we're doing the right thing.''
Henley said Oracle's customer relationship management software business, where it competes with Siebel Systems Inc., Vantive Corp. and Clarify Inc., was growing very quickly and that Oracle expected to be taking on No. 1 Siebel before long. Oracle's fourth-quarter customer relationship software revenues was $44 million, up 138 percent from a year ago, Henley said.
''We continue to see explosive growth over the next couple of years'' in that business, which is composed of software to help automate sales forces, travel and other so-called front-office company functions, Henley said.
For the full year, Oracle had net income of $1.29 billion, or 87 cents a share, up from $813.7 million, or 54 cents a share. Revenue climbed to $8.83 billion from $7.14 billion.
Ellison also reiterated a target of cutting $1 billion in costs during the next 18 months by using its own software and technology to become an e-business. He said on Tuesday that he believed the company could boost its pretax margin to 30 percent from the current 20-percent range.
''It's pretty ambitious,'' said Jim Pickrel, an analyst at San Francisco-based Hambrecht & Quist. ''But nonetheless, he's made an important observation and it shows he's not being complacent.''>>
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