News > Technology
Oracle tops targets
Software maker earns 14 cents a share on sales that beat most forecasts; stock rallies.
June 18, 2002: 7:09 PM EDT

NEW YORK (CNN/Money) - Oracle Corp. Tuesday reported a fiscal fourth-quarter profit and revenue that were down from a year earlier but still topped Wall Street's expectations.

But the upside surprise was somewhat offset after executives during a conference call lowered the bar for profitability in the current quarter and said they expect weakness in corporate technology spending to linger at least for the remainder of this year.

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"Our visibility going forward remains very limited, as has been the case for the last 18 months," said Jeff Henley, Oracle's chief financial officer

"Our assumption is that the U.S. economy will continue to improve, at least gradually, but technology spending will not show significant improvement probably for another six months," Henley said.

Henley said Oracle is now aiming for a fiscal first-quarter profit of 7 cents per share; company watchers recently had been expecting 9 cents per share, according to a survey conducted by earnings tracker First Call.

After the markets closed, Oracle said it earned $760 million, or 14 cents per share, during the quarter ended May 31. That excludes one-time charges and was 2 cents per share better than the 12 cents per share most analysts had expected, according to First Call's survey.

Including an impairment charge related to its investment in Liberate Technologies, Oracle logged net income of $656 million, or 12 cents per share. That compares with $854.9 million, or 15 cents per share, in the year-ago period.

At $2.8 billion, Oracle's fourth-quarter revenue fell 12.5 percent from the same quarter a year ago but exceeded the $2.6 billion analysts generally had expected.

Oracle's fourth-quarter license revenue, which reflects new bookings, came in at $1.2 billion, which was down 25 percent from $1.7 billion last year but still higher than many had expected.

In the fiscal first quarter, Henley said Oracle's license revenue is likely to fall between 15 percent and 25 percent from the sale period a year earlier.

Like most of its counterparts, Oracle, the world's No. 2 independent software supplier, has been suffering from a protracted slowdown in corporate information technology spending.

There also had been speculation that the company might miss its fourth-quarter earnings targets, until Oracle Chairman and CEO Larry Ellison last week assured investors the company would not.

Then the concerns turned to revenue, as pessimistic industry observers, wary of the generally sluggish market conditions as well as increased competitive pressure on Oracle's core database-software business, worried that the company might have hit the numbers as a results of tighter cost controls.

Shares of Oracle (ORCL: Research, Estimates) were 28 cents higher at $9.26 in extended-hours trade following the company's conference call Tuesday evening. They had traded as high as $10.25 shortly after the company released the earnings results.

Separate profit warnings from high-tech heavyweights Apple Computer Inc. and Advanced Micro Devices Inc. also were in the headlines during the after-hours session.

Known primarily for its database products, which remain its core business, Oracle recently has extended its reach into related business applications. That shift has exposed the company to intense competition from companies such as Siebel Systems (SEBL: Research, Estimates), BEA Systems (BEAS: Research, Estimates) and SAP (SAP: Research, Estimates).

On the database front, longtime rivals IBM (IBM: Research, Estimates) and Microsoft (MSFT: Research, Estimates) have been posing an increasingly competitive threat, and as the database-software market matures, the business has grown less profitable for all of them.

Oracle executives Tuesday downplayed the competitive threat to their database business.

"My impression is that we're gaining share," Ellison said. "More and more people are using Oracle."

He took particular issue with a recent Gartner Dataquest survey that showed IBM had edged past Oracle in database market share, suggesting that the "peculiar methodology" by which the research firm collected the data was flawed.

But at the same time, Oracle reported that sales of new database-software licenses had dropped 19 percent to $1.4 billion in the fourth quarter, from $1.7 billion during the same quarter last year.

Total database revenue fell 16 percent to $2 billion from $2.4 billion during the year-ago period.

Meanwhile, Oracle said sales of new application software licenses fell 16 percent in the fourth quarter to $385.3 million from $461.3 million a year earlier. Total application revenue was down 9 percent at $776.5 million, the company said.  Top of page