Oracle shows sales and earnings growth in Q1

Oracle shows sales and earnings growth in Q1

Oracle has reported both revenue and earnings growth in its first fiscal quarter.

Revenuefrom new software licenses rose 7 per cent, to $US563 million.

Oracle posted revenue of $US2.22 billion for the quarter ended August 31, up 7 per cent from last year's first quarter. Net income was $US509 million, up 16 per cent from last year, as the company continued to post higher margins than it has in the past. Chief Financial Officer, Harry You, said Oracle's trailing 12-month operating income of $US4 billion and operating margin of 38.5 per cent were all-time highs.

Net income per share was $US0.10, above the $US0.09 consensus estimate of analysts polled by Thomson First Call. Revenue was slightly below analysts' $US2.23 billion mean estimate.

Oracle's general and administrative expenses grew sharply over last year as it spent $UD28.5 million on its campaign to acquire rival PeopleSoft. While Oracle's sales and marketing, product support, research and development, and administrative costs all rose, it kept its total operating expenses nearly flat by trimming its services costs by 5 per cent, saving $US23 million.

Core database sales drove Oracle's software sales growth, and Oracle president, Charles Phillips, said Oracle's advantage over rivals in that market is clear: "We have grid, they don't."

Growing industry interest in deploying distributed computing platforms was driving sales of Oracle's grid-enabling database technology, he said. Sales of new licenses for applications plunged from last year's first quarter, however, falling to $US69 million, a 36 per cent decline. Oracle's total applications revenue, including support and services, fell 9 per cent to $US497 million.

Phillips and other Oracle executives downplayed the seriousness of the applications sales drop.

You, who joined Oracle two months ago from Accenture, said the company was unhappy with the applications results but expected growth in later quarters.

Phillips said Oracle was restructuring its applications sales group, creating a dedicated sales force in each geographic region.

It was also rolling out a major update of its E-Business Suite, version 11i10, that Phillips expects to spark sales growth.

Oracle's services group also showed declines, as services revenue fell 7 per cent to $476 million and consulting revenue slipped 11 per cent. Those declines, however, were expected, and would probably continue throughout the fiscal year, You said.

Oracle, along with its customer companies, was increasingly tapping lower cost labor in developing countries for IT services work, and its billing rates were lower for those consultants, he said.

Oracle's increasing reliance on outside partners had reduced its services revenue.

Its trend toward hiring in developing countries was evident in its headcount numbers. Its US headcount fell, as it did every quarter last year, to 16,500 - about 1000 fewer US workers than Oracle had at the end of last year's first quarter. However, its international headcount grew by nearly 3000, raising Oracle's total employee roster to 42,100.

You said Oracle was optimistic about its growth for the rest of its 2005 fiscal year.

"We appear to have powered through a lull in the economy," he said. "The software industry (trend) is the strong becoming stronger and the weak becoming weaker and less relevant to the market."

Executives briefly addressed Oracle's ongoing campaign to win control of PeopleSoft through a hostile, US$7.7 billion tender offer to PeopleSoft's shareholders.

Oracle remains committed to acquiring PeopleSoft but still faces two major hurdles, according to president, Safra Catz: Winning approval of the deal from the European Commission, and the repeal of PeopleSoft's "poison pill", an anti-takeover provision in PeopleSoft's bylaws. Because of those obstacles, no deal was imminent, Catz said.

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