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Oracle 4Q beats Street
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June 15, 1999: 6:45 p.m. ET
Database firm shrugs off Y2K concerns with strong license growth
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NEW YORK (CNNfn) - Oracle Corp. Tuesday reported a fiscal fourth-quarter profit of $527 million, well ahead of Wall Street estimates as the firm shed its Y2K-related woes and posted strong gains in licensing its software products to large organizations.
Separately, Oracle cut approximately 325 jobs, less than 1 percent of its global workforce as part of the company's plan to cut $1 billion in spending by moving to a strict e-business model.
The Redwood Shores, Calif.-based company logged a profit of 36 cents a share. Analysts polled by First Call expected Oracle (ORCL) to earn 32 cents a share in the quarter. Revenue jumped 22 percent to $2.9 billion.
Oracle shares fell 1-5/16 to close at 25-1/8 on the Nasdaq stock market prior to the news. Its shares jumped to 29-1/2 in after-hours trade on the Instinet trading system after the earnings announcement.
Wendell Laidley, an analyst at Credit Suisse First Boston, said investors should react favorably to Oracle's stock when the market opens Wednesday.
"This is definitely an upside surprise," Laidley said.
Y2K woes disappear
Analysts have expressed fears over growth in Oracle's applications business, particularly as large companies cut technology spending until they're convinced they've resolved all their Year 2000 bug issues.
While Oracle reported only 6.6 percent license growth in the third quarter, the company posted 22 percent growth in the fourth quarter. More notably, applications software sales increased 28 percent.
"Clearly, Q3 was an anomaly," Ray Lane, Oracle president and chief operating officer, said in a conference call with financial analysts.
"Oracle's applications software license growth rate of 28 percent is especially impressive when you consider the following two facts," said Larry Ellison, Oracle chief executive officer. "Y2K is just around the corner and every other [enterprise software] vendor -- SAP (SAP), PeopleSoft (PSFT), BAAN (BAANF) and J.D. Edwards (JDEC) -- has reported declines of software sales in their most recent quarter."
Laidley, who rates Oracle a "buy," said the company's licensing revenue growth blew away his estimates of 2 percent on a year-over-year basis.
"This clearly demonstrates that Oracle's applications business is showing immunity to the market dynamics that have negatively impacted [other enterprise software firms]," Laidley said. "It's basically Oracle and Siebel (SEBL) doing well in that space right now."
James Pickrel, an analyst at Hambrecht & Quist, took a slightly less effusive approach to Oracle's results noting that analysts had revised their expectations downward in anticipation of the earnings results.
Pickrel added that the fourth quarter, which accounts for as much as 40 percent of the company's annual revenues, is typically Oracle's strongest.
"All their sales reps are going for quotas and so on during the fourth quarter," Pickrel said.
Nonetheless, Pickrel, who rates Oracle a market perform, said the company exhibited few signs of weakness.
"Everyone was expecting some soft areas, but they came out well," Pickrel said.
Oracle easily outstripped its year-ago fourth-quarter results, when it posted a profit of $403 million, or 27 cents a share, on $2.4 billion in revenue.
For the 1999 fiscal year, Oracle earned $1.3 billion, or 87 cents a share, on $8.8 billion in revenue, compared with 1998 earnings of $955 million, or 64 cents a share, on $7.1 billion in revenue.
Internet model brings job cuts
Separately, an Oracle spokeswoman said the 325 job cuts, which mostly affect U.S. operations, is a result of the company's transition to a more efficient e-business model. She said none of the cuts came from the company's product-development operations.
Oracle has revamped its entire product line to take advantage of the Internet, and the company has been moving its operations - such as payroll and human resources management - to an Internet-based model.
Ellison has set a goal of $1 billion in savings over the next 18 months.
The spokeswoman didn't say whether Oracle planned further job cuts in the near term.
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