Oracle posts database-driven Q3 growth

Oracle has reported solid third-quarter results, meeting analyst expectations and posting revenue growth in a quarter that executives said was marked by strong sales in the company's database business.

Particularly noteworthy were sales of Oracle's Real Application Clusters (RAC) technology, chief executive officer, Larry Ellison, said. The technology let companies run their databases across groups of servers, and its increasing sales numbers show that customers were building database grids, Ellison said.

Oracle's revenue for the quarter, ended February 29, totalled $US2.5 billion, up 9 per cent from the year-earlier (and one day shorter, due to the leap year) period. Net income rose 11 per cent, to $US635 million. Sales of software update licenses and product support remained Oracle's biggest revenue-generator, growing to $US1.2 billion during the quarter.

Revenue from new software licenses also grew.

Services revenue dropped 11 per cent year-over-year, to $US486 million.

Oracle's continuing campaign to acquire rival PeopleSoft cost $US58 million in professional services fees during the quarter, the company said. While Oracle's database business continued its 2004 pattern of quarterly gains over 2003's results, its applications business maintained its pattern of quarterly declines.

New software license revenue held steady against last year's third quarter and revenue from updates and support rose, but services revenue dropped, leading to a 5 per cent decline in total applications revenue, to $US580 million.

Ellison attributed the decline in applications revenue to a "brutally competitive" industry.

While Oracle faced intense pricing pressure from Microsoft and IBM in its database business, it haf the advantage of unique database technology with features unmatched by its rivals, he said.

Ellison cast Oracle's services revenue declines as a consequence of its success in making its products easier to install and maintain. That business offers the lowest profit margins for Oracle, he said.

Growth in revenue from the company's high-margin maintenance and updates business was a sign that Oracle was "reshaping" in advantageous ways, he said.

Oracle's headcount increased in the quarter to 41,194, its highest level in the past year-and-a-half. Most of the growth came internationally. The company's US headcount continued its decline, to 16,908.

Mounting industry concerns about outsourcing, a term now commonly used to refer to the practice of moving jobs out of the US and into developing nations where labour is less costly, prompted Oracle to make a change during the quarter: It is renaming its Oracle Outsourcing managed applications business. Using IBM's favourite mantra, Oracle will now call that business Oracle Applications On-Demand.

"This outsourcing name is not a good name anymore, so we don't like that name," Ellison said with a laugh, adding that Oracle's hosted applications datacentre was in Texas, USA.

About 300 customers subscribe to the managed applications service, he said.

Ellison briefly addressed the state of the company's $US9.4 billion takeover bid for PeopleSoft.

"We're looking forward to hearing from the court," Ellison said.

He was referring to the US Department of Justice's lawsuit seeking to block the bid.

Trial on the suit is scheduled to begin in June, in San Francisco, and last one month.

Ellison also reiterated earlier comments that Oracle was eyeing targets other than PeopleSoft.

"There's a number of other acquisitions we're looking at," he said. "We think we'll have plenty of use for our cash."