Oracle Corp. said Wednesday that fiscal fourth-quarter profit rose 12%, beating expectations, as computer services propelled growth at the world's largest database software maker.
The company's profit in the period ended May 31 rose to $402.8 million, or 41 cents a diluted share, from $360 million, or 36 cents, in the year-earlier period. Revenue increased 24%, to $2.41 billion from $1.95 billion.
Oracle is relying more on its computer-services arm, which helps companies install and use Oracle products, for growth as it struggles to boost its weakening application software revenue.
Selling more applications, which are used to automate business processes such as financial accounting and manufacturing, is crucial for Oracle as demand for its mainstay database software slows.
"The biggest challenge is getting applications back on track," said analyst Melissa Eisenstat of CIBC Oppenheimer, who rates the stock "hold."
Per-share earnings beat forecasts of 38 cents a share, the average estimate of analysts polled by IBES International Inc.
Shares of Oracle, the second-largest independent software company after Microsoft Corp., rose 6 cents to close at $24.31 on Nasdaq. Results were released after the close of U.S. trading. The shares rose as high as $26.50 in after-hours trading.
Application software, used to track inventory schedules and customer-service calls, is considered the area that will propel Oracle's growth as more companies snap up the programs to manage their businesses.
Corporations try to trim expenses by buying applications, which help automate tasks that formerly had to be done by people.
Sales of Oracle's applications software fell 1% this quarter to $215.8 million, from $218.6 million a year ago. Many analysts had expected applications licenses to increase by 20% to 30%.
"We had flat performance in the quarter," said Jeffrey Henley, Oracle's chief financial officer. "It was very disappointing."
Oracle's decline is all the more startling considering the company's applications sales rose 78% in the same period a year ago.
"It's clearly indicative of poor execution," Henley said. Oracle is betting its new application software that started shipping last month, called Release 11, will jump-start sales.
Redwood Shores-based Oracle's applications have lagged the 60% growth rates of smaller rivals PeopleSoft Inc., Baan Co. and SAP of Germany for the last two quarters.
The company's services revenue in the fourth quarter rose 43% to $1.17 billion, making up 49% of total revenue. Services revenue, which accounted for 56% of revenue in the fiscal third quarter, has helped Oracle weather fluctuations in its database and application-software sales.