Oracle earnings head upward

NEW YORK (CNNMoney.com) -- Oracle Inc. Monday reported higher quarterly earnings and revenue from a year earlier, with net income meeting Wall Street expectations, helped by a flurry of recent acquisitions.

But Oracle (up $0.00 to $17.91, Charts) shares slipped nearly 3 percent following the news on expectations that the company would deliver another round of impressive results as it did in the previous quarter.

The business software maker reported net income of $967 million, or 18 cents a share, for its fiscal second quarter ended Nov. 30. Excluding certain items, earnings jumped 18 percent from a year earlier to 22 cents a share.

Analysts had expected the Redwood City, Calif.-based company's earnings to rise to 22 cents a share.

The company, which competes with Microsoft (up $0.00 to $29.89, Charts) and SAP (up $0.00 to $51.88, Charts), said sales leaped 26 percent to $4.2 billion billion in the quarter. That was slightly above Wall Street's estimates of revenue of $4.15 billion.

More than one analyst blamed the stock sell-off on expectations that Oracle would easily top estimates as it did in the previous quarter. "Some people were thinking they would beat handily," said Trip Chowdhry, an analyst with Global Equities Research.

The company also reported that its new business software licenses, a key measure of an indicator of the company's future business prospects, rose 14 percent from a year earlier to $1.21 billion.

Applications growth surged 28 percent, outpacing database and middleware license growth of 9 percent, the company said.

Richard Davis, managing director at Needham & Co., said the deceleration in database growth, which is Oracle's flagship business, was not worrisome.

"For anyone who has been tracking Oracle for more than a few years, you realize that database growth does bounce around quarter to quarter," Davis wrote in an e-mail. "I really wouldn't read too much into this quarter's database numbers."

Fears have surfaced on Wall Street recently that the company's flagship database business is headed for a slowdown.

Two weeks ago, Oracle stock dipped 5 percent after a Lehman Brothers analyst noted that sales of its database software might miss expectations when the company reported its earnings.

Oracle execs said during a conference call that the company expects its net income to increase 15 to 19 percent in the current third quarter, while revenue climbs 22 to 24 percent from last year.

Chief Executive Larry Ellison said he expects newly acquired software products to play an increasing role in revenue growth in the future, specifically in the retail, telecom and banking sectors.

"We are very happy with our vertical applications acquisition strategy," said Ellison. "It will move the needle in the second half."

Oracle has been on a buying spree in recent years, acquiring rivals such as Siebel Systems and lesser-known players such as Portal Software, which makes billing and revenue management software for the telecommunications industry.

Chief financial officer and president Safra Catz also noted on the conference call that the company was well on its way of meeting its five-year plan of 20 percent annual earnings per share growth.

Oracle stock has been one of the top performers of the tech sector so far this year, soaring nearly 40 percent, outperforming both the software sector and the broader S&P 500 index.

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