Oracle feels Q2 growth pains in applications business

Oracle had revenue growth of 19 percent in its Q2 but came up a bit short of sales forecasts, as its struggles to grow its applications business.

Oracle's string of acquisitions this year helped it grow its revenue 19 percent in its just-ended quarter. Still, the company is struggling to increase its applications sales as much as it forecast it would when it took over PeopleSoft.

Oracle's revenue for the quarter ended Nov. 30, the second of its 2006 fiscal year, was US$3.29 billion, up from the US$2.76 billion generated in last year's quarter, before Oracle closed on its PeopleSoft acquisition. On an adjusted basis that includes support revenue Oracle's acquired companies would have recognized during the quarter, the company reported revenue of $3.39 billion.

Oracle's net income was US$798 million, down from US$815 million last year. Excluding costs associated with its acquisitions spree, Oracle said it would have had earnings of US$972 million, or US$0.19 per share, in line with analysts' consensus forecast, according to Thomson First Call.

On an adjusted basis accounting for acquisition effects, Oracle's applications revenue for the quarter was US$1.28 billion, including US$266 million from new license sales. In last year's second quarter, Oracle had applications revenue of US$685 million, including US$215 million from new license sales.

In an earnings preview, Citigroup Research analyst Tom Berquist reported that Oracle is holding strong in the database market but struggling with applications sales. "Existing customers will continue to purchase more seats as they grow and, in some cases, additional modules, but new customers are taking an earnest look at SAP and even Lawson," he wrote in a research note earlier this month.

Oracle's database and middleware revenue for the quarter was US$2.11 billion, up 2 percent from last year's second quarter.