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Oracle beats estimates
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March 14, 2000: 9:03 p.m. ET
Lower costs, higher sales contribute to rise in company's third-quarter income
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - Oracle Corp., the world's second-largest software company and the leader in corporate database software, reported that its third-quarter net income rose 80 percent, driven by rapidly rising sales and lower operating costs.
Redwood Shores, Calif.-based Oracle (ORCL: Research, Estimates) reported fiscal third quarter net income of $498 million, or 17 cents per share, up from $277 million, or 9 cents per share, in the same period last year. Revenue rose 18 percent to $2.45 billion from $2.08 billion.
Oracle's results beat the mean analyst estimate of 13 cents per share, according to earnings tracker First Call Corp.
Database software sales rose 32 percent to $778 million, while applications software sales rose 35 percent to $199 million. Consulting, education, and support revenue grew 10 percent to $1.4 billion. Sales of Customer Relationship Management software mushroomed 179 percent, Oracle said. Oracle competes with Siebel Systems (SEBL: Research, Estimates) and Clarify Inc. (CLFY: Research, Estimates) in CRM software, which is used in customer service call centers and corporate marketing departments.
"Oracle's database and e-Business applications have become the software standard for the Internet," said Oracle CEO Larry Ellison. "All 10 of the world's biggest Web sites use Oracle, as do 93 percent of the public dot.com companies. The faster the Internet grows, the faster we grow."
The $498 million in third-quarter net income does not include a gain Oracle made by selling part of its stake in Liberate Technologies (LBRT: Research, Estimates), a San Carlos, Calif. company that makes software for delivering Internet content to television set-top boxes. If that gain had been included, Oracle's net income for the quarter would have been $763 million, or 25 cents per share.
Oracle's stock has rocketed to 77 today from 20 last September, a gain of 285 percent over a six-month period. As a result, very high expectations for Oracle's future growth have been priced into the stock, and any disappointment could cause the shares to plunge.
Nevertheless, Banc of America analyst Bob Austrian recommended Oracle stock at its current level. "Oracle is just at the beginning of a five-year period of enabling the economy's movement into the new digital age," Austrian said Tuesday on the CNNfn television network.
Oracle's net income has grown faster than its revenue because the company has used its own software to dramatically reduce its internal costs.
"Nine months ago, we set out to save one billion dollars annually by using our own Internet e-Business applications," said Oracle CFO Jeff Henley. "That billion dollar savings translates to a 10 point improvement in our margin."
Oracle is reaching that cost-saving goal faster than it had planned. Its third quarter operating margin, which is operating income divided by revenue, improved 11.8 points to 31.4 percent, compared to 9.6 percent in the same period last year.
Ellison told CNNfn that he expects that margin saving to improve further. (366K WAV or 366K AIF)
Oracle's has gained additional attention from analysts and investors recently by reaching deals with major companies to create three different Internet-based market exchanges that could host hundreds of billions of dollars in spending. The companies involved in those exchanges include retailers Sears and Carrefour SA, as well as automakers General Motors, Ford, and Daimler Chrysler AG.
Ellison said he saw Web-based B2B as a tool that will help global companies operate more efficiently and that Oracle can set up B2B sites in 30 days. (411K WAV or 411K AIFF) 
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Oracle Corp.
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