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Oracle 4Q beats the Street
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June 20, 2000: 4:27 p.m. ET
Database and e-commerce software vendor's revenue and profit soars
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NEW YORK (CNNfn) - Oracle Corp., the world's second-largest software company, on Tuesday reported a fiscal fourth-quarter operating profit that exceeded Wall Street's predictions on strong sales of its application software programs and by using its own software to become more productive.
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Oracle CEO Larry Ellison talked to Stuart Varney on Moneyline News Hour
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For the three months ended May 31, Oracle earned $926 million before one-time items, or 31 cents a share, up from $527 million, or 18 cents a share, in the year-ago period. Analysts polled by earnings tracker First Call/Thomson Financial had expected Oracle to earn 25 cents a share during the quarter.
Including a one-time gain of $6.5 billion from the sale of stock from its Japan subsidiary and $48.4 million in other one-time investment gains, Oracle earned $4.9 billion, or $1.63 a diluted share. Revenue rose to $3.4 billion from $2.9 billion a year earlier. For the full fiscal year, revenue rose to $10.1 billion, up from $8.8 billion a year ago.
 "We think this year, this wonderful year, was our period of adjustment," Larry Ellison, Oracle's chief executive, told analysts in a conference call. "We think that transition is behind us and top-line growth will look a lot better this coming year. Our pipeline is just over the moon."
While Oracle's earnings rang in above analysts' forecasts, investors sold off the company's shares in extended-hours trading. Shares of Oracle (ORCL: Research, Estimates) fell as much as 4-1/32, or almost 5 percent, to 82 in after-hours activity on significant volume, with almost 3 million shares changing hands. The stock rose 31/32 to 86-1/32 in regular trading before earnings were announced. Its shares are up more than 53 percent this year.
Database sales fall short
"The stock had a great run-up in anticipation of solid earnings, and I think their database revenue was a little shy of what people were looking for -- that's probably why people are selling in after-market (trading)," said Andrew Roskill, an analyst with UBS Warburg. "Overall, it was a good quarter."
 Indeed, Oracle's sales of its database software, programs used by corporations to manage large amounts of data and records, rose a smaller-than-expected 12 percent, triggering a decline in the company shares in after-hours trading, Roskill said.
Ellison said the reason for the shortfall in database sales was a change in the way the company offers discounts to its clients through its sales force. Rather than offering the software packages at a discount at its fiscal year-end to boost final-quarter profit, Ellison said the company is now offering pricing that is competitive year round.
"While that may underscore our database growth in the fourth quarter, it bodes extremely well for database sales in the first quarter, and the second quarter and the third quarter," Ellison said. "It's because we didn't sweep the table in the fourth quarter and we will never sweep the table again."
"Larry is understating it," joked Chief Financial Officer Jeff Henley.
Roskill pointed out CNNfn's Street Sweep that, if anything, the Redwood Shores, Calif.-based company made up for that shortfall anyway by selling more application-related products. What's more, he expects the company will see positive revenue growth in fiscal 2001, something that could help boost its share price in subsequent quarters. (435KB WAV) (435KB AIFF)
Strong applications business
Application software sales, or sales of large-business software that helps run network computer systems, jumped 61 percent to $447 million in the fiscal fourth quarter, Oracle said. Revenue from consulting, education and support rose 7 percent to $1.5 billion.
Ellison also pointed out the company's successful foray into that high-volume, low-priced application software business is allowing it to compete head to head with Microsoft Corp. (MSFT: Research, Estimates) and other software makers. It has also given the company an "extremely competitive advantage" over German rival SAP (SAP: Research, Estimates), Ellison said.
 "We believe that for the next four quarters, we will sell more application software than SAP," he said. "That company is in a serious position."
Henley said that sales for the company's fiscal first quarter, which will end this coming Aug. 31, will still be slower than in the fourth quarter, given that this was the last quarter that the software maker pushed to finalize its sales before its fiscal year ends. At the same time, Henley said he expects sales will ring in better than analysts' are currently forecasting.
"We have an enormous sales pipeline for both applications and technology," Henley said. "Typically that's proven to be a good indicator of how we'll do."
As for the large chunk of cash the company was left with after selling off stock in its Japan subsidiary, Ellison advised analysts to build in "at least some additional interest income" into their subsequent estimates. Analysts polled by First Call are currently anticipating earnings of 11 cents a share for Oracle's fiscal first quarter, and 99 cents for its entire fiscal 2001 year. 
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Oracle
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