Oracle Profit Tops Analysts’ Expectations
Business software maker Oracle Corp. posted a profit Tuesday that topped Wall Street estimates and forecast solid growth this quarter. Its shares rose 9% to their highest level in four years.
The company posted its strongest first-quarter license growth in more than five years, gaining share across all its product lines, and its chief financial officer forecast 22% to 24% revenue growth for the second quarter.
Analysts said the results showed the company was succeeding in keeping customers gained through a string of acquisitions that included PeopleSoft.
“It is one thing to just hold onto the customer,” said Kim Caughey, an asset manager at Fort Pitt Capital Group. “It is another thing to get them to buy the next version as well. It looks like they are doing that.”
Net income for the fiscal first quarter rose 29% to $670 million, or 13 cents a share, from $519 million, or 10 cents, a year earlier. Revenue rose nearly 30% to $3.59 billion from $2.77 billion.
Excluding items, the company said it posted a per-share profit of 18 cents. Analysts on average were expecting the world’s biggest database software maker to post a per-share profit of 16 cents on revenue of $3.47 billion, according to Reuters Estimates.
Total software revenue rose 29% to $2.7 billion, led by an 80% gain in new license revenue from applications, compared with a Wall Street target for a 66% gain. Stripping out its Siebel, Portal and I-flex acquisitions, the company said revenue grew 47%.
The Redwood Shores, Calif.-based company said database and middleware new license revenue gained 15% while services revenue rose 33% to $846 million.
“We exceeded our guidance on every metric and delivered strong revenue growth across all product lines and geographies,” Oracle Chief Financial Officer Safra Catz said.
The results come as investors are beginning to embrace the company’s decision to spend some $20 billion over the last three years to push into the market for business applications as its core database software market matures.
Oracle shares have gained about 18% since June 15 when it first told investors of stronger-than-expected software license revenue for the fiscal fourth quarter. At the same time shares in its major rival, Germany’s SAP, have fallen about 5%.
Analysts say the two rivals are largely taking share from smaller companies, though Oracle is pegged to grow faster in the applications market in 2006.
According to research firm AMR, SAP’s share of the business applications market is expected to grow to 43% in 2006 from 42%; Oracle’s share is seen rising to 23% from 20%.
The company’s shares jumped more than 9% to $17.65 in after-hours trading after falling 12 cents to $16.13 in regular trading.
