ORCL--Oracle tops earnings, sales targets
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 6:55 PM ET Dec 14, 2000
REDWOOD SHORES, Calif. (CBS.MW) - Flying in the face of Microsoft's earnings warning, software linchpin Oracle Corp. on Thursday reported better-than-expected earnings and renewed strength in its all-important application business.
The database software maker's (ORCL: news, msgs) earnings increased 62 percent to $623 million, or 11 cents a share, compared with $384 million and a split-adjusted 6 cents a diluted share in the year-ago quarter. At minimum, analysts expected Oracle to earn 10 cents a diluted share, or roughly $560 million, according to First Call.
Oracle's revenue grew 17 percent to $2.7 billion, beating the year-ago figure of $2.3 billion and the expected level of $2.67 billion. Meanwhile Oracle's flagship database software business, which runs on server computers, increased revenue 19 percent to $775 million.
If there were any doubts, Oracle proved its sales were completely unaffected by the personal-computer slump that's crippled other tech leaders including Microsoft, Intel (INTC: news, msgs) and Compaq Computer (CPQ: news, msgs) . The results give credence to a strong outlook for the type of business software sold by Oracle, Siebel Systems (SEBL: news, msgs) , Sybase (SYBS: news, msgs) and others.
"Unlike the PC market, the enterprise software market appears to be very healthy," said Larry Ellison, Oracle's chief executive, following earnings. "We're already off to a great start ... We had a pretty great first half of December."
Application angle
Perhaps most important to the company's stock valuation, Oracle's sales of applications software, the fastest-growing part of the company, increased 66 percent in the second quarter to $279 million, topping the company's projections of at least 50 percent growth.
The company now claims to have 80 customers using all or part of its software applications suite. Large customer deals in the quarter came from telecom equipment maker JDS Uniphase (JDSU: news, msgs) , insurance company American General (AGC: news, msgs) , and Compaq.
"We grew strongly everywhere in the world: Asia, Europe and the U.S.," said Jeff Henley, Oracle's chief financial officer, in an interview. "We thought that we would bounce off of that first quarter number. We were bullish. Now, we feel even more bullish about the rest of the year."
Listen to Oracle's CFO Jeffrey Henley in the second-quarter conference call.
He's now calling for increased applications growth of about 75 percent in Oracle's fiscal-third quarter. And he says database revenue also could increase.
Oracle executives said that they foresee little that could stop the company from building off its second-quarter success.
"If there were a sudden, sharp recession, that would affect Oracle," Henley said. "But our economists think it won't. We're not anticipating it."
Henley points out that Oracle picked up its hiring pace for the first time in the past five quarters - albeit a paltry 2 percent. He predicted similar employee growth for the rest of the fiscal year.
Cooling concern
Oracle's quarter is expected to quash concerns analysts had about Oracle's fiscal-first quarter. Three months ago, Oracle reported its application software fell short of expectations by only increasing sales 42 percent from the year-earlier quarter to $156 million. Analysts were calling for sales growth of 57 percent, with even stronger growth from the company's customer-relationship-management software.
Reasons Oracle executives think the good times could keep going include continued cost cuts relative to sales growth. By using its own software, Oracle has raised its operating margin by 10 percentage points in each of the past four quarters. Henley says he expects continued operating margin benefits beyond the 2001 fiscal year.
Oracle shares could be set to move Friday, analysts said. Due to the persistent tech slump and the subpar first quarter, Oracle shares have slipped 31 percent since it last reported in September.
It's unclear what Oracle's results will mean for the overall tech market. Prior to earnings, analysts thought that Oracle's earnings could be a possible catalyst for a broad rally. But now, Oracle's news is counterbalanced by Microsoft's bomb.
"We wondered if Microsoft was going to pre-release," said Laura Lederman, analyst with William Blair. "We don't have to wonder any more."
Oracle shares rose slightly after hours trading to $27.63. Shares fell 88 cents to $27.50 in regular Nasdaq trading.
Mike Tarsala is a San Francisco-based reporter for CBS. |
