Oracle tops forecasts despite sales, profit dip

[June 24, 2009]  SAN FRANCISCO (AP) -- Software maker Oracle Corp.'s results for its latest quarter topped Wall Street's forecast Tuesday, despite a 5 percent drop in sales and a 7 percent decline in profit.

The company blamed the declines on the effects of a stronger dollar -- which makes deals done in other currencies translate into fewer greenbacks. Companies also have been shelling out less for new software because of the recession.

Still, Oracle's chief financial officer, Jeff Epstein, said in a statement that Oracle executed "substantially better" than the company expected. A key reason: better sales of support contracts, which are a cash cow for Oracle even in bad times.

"It's kind of hard to complain, isn't it?" said Patrick Walravens, an analyst with JMP Securities. "Flawless might be a bit strong, but I think it was better than just about anybody expected. ... The big question is, now what?"

There weren't any big surprises in Oracle's guidance, which is a good thing considering the uncertainty about the economy. Oracle offered a sales forecast for the current quarter that was slightly better than expected, while its profit forecast was within the expected range.

The stock was up 51 cents, or 2.6 percent, to $20.38 in after-hours trading. During the regular session, before the results were announced, Oracle shares closed down 10 cents at $19.87.

Oracle, which is based in Redwood Shores, said that its net income from March through May was $1.89 billion, or 38 cents per share. In the same period last year, it was $2.04 billion, or 39 cents per share.

Excluding stock-based compensation and one-time items, Oracle said it earned 46 cents per share, which was 2 cents better than the average estimate of analysts polled by Thomson Reuters.

Sales fell to $6.86 billion, nearly $400 million better than the analyst estimate.

Sales of new software licenses fell 13 percent to $2.74 billion, indicating that Oracle's customers are being tightfisted about upgrading their computer systems with new programs.

They still have to maintain their older software, though, and in most cases they'll pay Oracle to do it. Oracle's revenue from software license updates and product support bumped up 8 percent to $3.05 billion in the latest quarter. That segment made up 44 percent of Oracle's overall revenue.

The next few months will mark a pivotal time for Oracle, a serial acquirer that's headed into new territory with its $7.4 billion acquisition of Sun Microsystems Inc., a deal that makes some industry observers nervous.

Oracle is the world's leading maker of database software, and has been expanding aggressively into other areas, like business applications. It's even going to make hardware now, provided the Sun deal goes through this summer as expected.

With the acquisition, Oracle will become more of a one-stop technology shop, like IBM Corp. and Hewlett-Packard Co., but will be saddled with the cost of supporting a huge server division.

The latest period was Oracle's fiscal fourth quarter. For all of fiscal 2009, Oracle's sales rose 4 percent to $23.25 billion. Full-year profit was $5.59 billion, a 1 percent increase over fiscal 2008.

For the current quarter, Oracle expects revenue to decline 1 percent to 4 percent from last year. Analysts had been predicting a 5 percent decline.

Profit should be 29 cents to 31 cents per share, excluding one-time items, Oracle said. Analysts were expecting 30 cents per share.

[Associated Press; By JORDAN ROBERTSON]

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