Oracle Corp yesterday exceeded analysts expectations with record third-quarter results announced after the markets closed. But signs of weakness and some cautious comments from the company immediately affected the company’s stock in after hours trading, with some analysts expected to lower estimates for the next two quarters.
Oracle topped by one cent the $0.19 earnings per share figure that analysts polled by First Call had anticipated. Net profits grew 36% to $293.2m while revenues were up 19% at $2.08bn for the three months through February. Breaking that down, the company said revenues from its core database and applications products, including licensing and support, grew 16%, led primarily by growth in the applications sector, while its education and consulting services revenue grew 27% during the quarter.
But database license revenues growth compared with the third quarter last year was a less impressive 10%, and applications software licenses grew only 5%. Tools showed negative growth, down 12%. License revenues as a whole were up only 7%. Oracle Corp’s chief operating officer Ray Lane said a few large deals towards the end of the quarter, which hadn’t been closed as expected, would have seen the figures for application licenses boosted to between 10% and 15%. We were tracking $200m of upside deals in the last two weeks, $62m of which were applications deals he said. Lane blamed a short quarter and the slow days of holidays as one reason for the shortfall, and said that the lower growth rates were partly due to a tough comparison with last year’s very strong third quarter. The numbers don’t tell the whole story said Lane. It’s a wildcard year, revenues should bounce back, but we are being conservative said chief financial officer Jeff Henley.
Oracle saw continued growth in the Americas, up 17% in the quarter and EMEA (Europe, Middle East and Africa), grew by 20%. Asia Pacific was up 25%. Oracle CEO Larry Ellison emphasized that orders already in the fourth-quarter pipeline were around 10% higher than on average, which, he claimed, would easily offset lower conversion rates in the pipeline, which were down around 2%. Lane said that this year will be the first time in three years that Oracle won’t be announcing a company-wide reorganization in June. We’re going to go into June with everything exactly the same way it is in the third quarter, he said.
Ellison claimed that with its internet strategy now in place and Oracle 8i shipping, Oracle had successfully updated its products from the now somewhat discredited client-server architectures still used by its major competitors, particularly SAP AG. Our product position has never been so clearly differentiated he said. Ellison predicted that ERP (enterprise resource planning) applications would soon be eclipsed by sales of CRM (customer relationship management) software. Version 3.0 of Oracle’s CRM software, due to ship this quarter, will help to boost the company to the number two position, behind Siebel Systems Inc he said, generating up to $60m in revenues in the fourth quarter. Oracle also won a number of large deals in the newer area of strategic procurement software from the Boeing Co and General Electric Co. Its main competition in this market comes from Ariba Technologies Inc.
