Oracle Says Third Quarter Revenues, Profits Soar

By Therese Poletti, San Jose Mercury News, Calif.

Mar. 21–Oracle said Monday that it posted record revenues while profits soared 42 percent in its fiscal third quarter, the first to include its biggest acquisitions of the past two years — PeopleSoft and Siebel Systems.

The Redwood City business software company said revenues for the quarter ended Feb. 28 were up 18 percent to $3.5 billion, from $2.9 billion a year ago. Net income in the quarter jumped to $765 million, or 14 cents a share, up from $540 million, or 10 cents a share, a year ago.

Excluding restructuring, merger-related charges and stock option expensing, Oracle said its net income was $1 billion, or 19 cents a share, which was one penny better than what analysts had been forecasting. According to Thomson First Call, the consensus estimate among analysts was 18 cents a share.

This is the first quarter to include the company’s $5.85 billion acquisition of Siebel Systems, which closed Jan. 31, and the $10.6 billion deal for PeopleSoft in January 2005.

Analysts said they were impressed with the growth in Oracle’s newly acquired applications businesses, including a higher-than-expected contribution from Siebel. Siebel reported licensing revenues of $22 million, while analysts had been expecting around $10 million. Oracle also said that in Europe, revenues from new applications were up more than 100 percent, growth that came in the back yard of its rival SAP, the German-based software giant.

But Oracle still faces the same challenges that forced it to begin its shopping spree for business application companies in the first place — slower growth in its core database software line.

Database issue

“I think everyone’s issue has to be around the database,” said Charlie Di Bona, an analyst with Sanford Bernstein. Bernstein is owned by AllianceBernstein, formerly Alliance Capital, which owns Oracle stock.

Oracle said revenues from its database and middleware products were up 5 percent from a year ago. “It’s not horrible, but it’s below what people were expecting, and that really is the core of the business, even after these acquisitions on the applications side,” Di Bona said. “The disappointment from the database sort of overwhelms any kind of solace you see from the applications business.”

Oracle Chairman and Chief Executive Larry Ellison pointed to innovations in the company’s database software that will help fuel future growth. In the conference call with analysts, he touted Oracle’s recently unveiled Secure Enterprise Search product, a program that searches a company’s internal databases in a similar way as Google searches the Web.

“It’s very Google-like, but it’s crawling your data,” Ellison told analysts, as he described the new product, which he introduced at Oracle’s OpenWorld in Tokyo earlier this month. Ellison noted that only users who have permission to see certain company data will have access to it under such a search. The product can be easily set up at any company, in about three days. “We think it will help drive database growth for years to come.”

Planned job cuts

In early February, Oracle said it planned to cut 2,000 jobs, or about 3.5 percent of its global workforce, as it seeks to save on redundancies following its Siebel purchase. It said it would have about 55,000 employees worldwide after the job cuts were complete. On Monday, the company said it had 55,582 employees at the end of the quarter.

In after-hours trading, Oracle shares were down almost 4 percent, losing 53 cents to $13.19. Before its earnings were released, its shares closed at $13.72, up 12 cents.

Contact Therese Poletti at tpoletti@mercurynews.com or (415) 477-2510.

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Copyright (c) 2006, San Jose Mercury News, Calif.

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