Friday March 12 3:00 AM ET 

Oracle Shares Drop Despite 36 Percent Profit Rise

By Duncan Martell

PALO ALTO, Calif. (Reuters) - Oracle Corp. (Nasdaq:ORCL - news)'s fiscal third-quarter profits
rose 36 percent -- in line with forecasts -- but weaker-than-expected revenue growth sent shares of
the No. 1 database software company plunging in after-hours trading.

Oracle Thursday said income for the three months ended Feb. 28 rose to $293.3 million, or 20
cents a share, from $215.1 million, or 14 cents, a year earlier. Revenue climbed 19 percent to $2.08 billion from $1.75
billion.

Although the per-share earnings were a penny better than the 20 cents Wall Street had expected, some analysts
expressed concern that revenue growth -- particularly sales of database and applications software -- was weaker than
expected. If the company does not have a particularly robust fourth quarter, they said, profits could fall short for the year.

''The bottom line is that revenue growth was a disappointment,'' said analyst Andrew Roskill at Warburg Dillon Read in
New York. ''One would hope the fourth quarter will be strong, but there are always caveats and we'll have to wait and see
how the quarter progresses.''

In after-hours trading, Oracle's stock fell as low as $30.875, down 16 percent from its close of $36.88 on the Nasdaq. In
regular trading, the stock fell $1.06 a share.

Even so, before Thursday's close, Oracle stock had doubled in the past 12 months, as the company's strategy of linking its
applications, or business management, software with the Internet sparked renewed interest in the company.

Oracle Chief Executive Lawrence J. Ellison told analysts on a conference call that the delay in shipping its latest database
software -- Oracle 8i -- could have cost it some revenue. It was slated to be available in December but began shipping
March 1. He said software developers were showing keen interest in the Internet-friendly database.

While some analysts were expecting database license revenue growth -- sales of new software -- of as much as 19
percent year over year, Oracle notched a gain of only 10 percent. And sales of its business management, or applications,
software, rose 5 percent in the third quarter from a year ago.

''The applications business is still pretty weak and people just don't buy databases the way they used to,'' said Robert
Tholemeier, an analyst at First Albany Corp. As the millennium approaches, companies are diverting more of their
technology spending to prepare their computers for the date change.

Computer-services revenue rose 29 percent to $1.3 billion from $974.2 million while operating expenses rose 17 percent
to $1.67 billion from $1.43 billion. Per-share results were also helped by the additional sale of shares in its Japanese
initial public offering and also by a decrease in sales and marketing costs.

While the slowdown in so-called enterprise resource planning market has hurt Oracle, it has already punished sales and
profits at its chief rivals: SAP AG (NYSE:SAP - news), PeopleSoft Inc., Baan NV and also Siebel Systems Inc.
(Nasdaq:SEBL - news)

''Once we get through (the year 2000), things will get better but the ERP market is pretty soft right now,'' Jeff Henley,
Oracle's chief financial officer, said in an interview. ''We believe (our) market-share gains in applications will accelerate
going forward.''

Oracle also had trouble closing a number of deals during the quarter, noting that its ''pipeline'' of potential sales was
strong. Company officials did not give an explanation during the conference call for not having closed the transactions.

Although the quarter was not a barn-burner, Oracle executives for their part said the year-earlier period was especially
strong, making year-over-year comparisons difficult.

''I definitely think this quarter was unusual and we'll bounce back to our normal rate of growth,'' Henley said in the call with
analysts. But, he cautioned, ''I'd counsel people to be conservative in their estimates.''

The quarterly results also reflect a 3-for-2 stock split that took effect March 1.