Oracle’s Expectation for ’06 Beats Analysts’ Target

Oracle Corp. said Wednesday that profit would rise more than analysts had expected next fiscal year, helped by the $10.3-billion purchase this month of PeopleSoft Inc.

Profit, excluding some costs, will be $4 billion to $4.3 billion, or 76 cents to 80 cents a share, in the year ending in May 2006, the Redwood City, Calif., company said. Analysts had expected 70 cents, the average estimate in a survey by Thomson First Call.

Chief Executive Larry Ellison spent 18 months fighting to buy PeopleSoft to bolster sales of applications used to handle tasks such as payroll and human resources.

Oracle, now the No. 2 maker of such software, behind SAP, fired 5,000 workers to reduce expenses and is courting PeopleSoft’s clients to persuade them to stay.

“They must feel very comfortable about being able to make that happen” to give the forecast so soon after completing the deal, said Chuck Jones, who helps manage $15 billion, including Oracle shares, at Stein Roe Investment Counsel in San Francisco.

Oracle shares rose 3 cents to $13.62 on Nasdaq. They gained 3.7% in 2004.

Profit, excluding some items, will rise to 62 cents a share in fiscal 2005, Ellison told analysts Wednesday at a company meeting in New York. That would match the average analyst estimate.

In fiscal 2006, Oracle expects sales of $14.1 billion to $14.5 billion, Chief Financial Officer Harry You said at the meeting. New software license revenue, a key measure of future sales, will be $4.3 billion to $4.6 billion.

The company expects to increase earnings 15% a year over the next five years, You said.

Costs associated with PeopleSoft’s restructuring will be $400 million to $600 million, and costs for Oracle’s restructuring will be $100 million to $300 million, mainly because of severances, You said.

The company is also expecting a 3% foreign exchange benefit, and said it had not yet decided whether to include costs for expensing stock options in its 2006 forecast. That cost will be about 2.3 cents a share, You said.

About 90% of the PeopleSoft workers who were offered jobs with the combined company Jan. 14 have accepted, Oracle President Safra Catz told analysts Wednesday.

The company is considering other acquisitions, including one that would help bolster its application server business, Ellison said. Rivals including SAP and IBM Corp. also rely on their application servers -- software to handle data exchange among business programs, database software and other applications -- to woo clients, he said.