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Oracle Profit Surges 35%; Forecast Beats Estimates
Oracle Corp., the largest maker of database software, said profit rose 35 percent and forecast earnings for the current quarter that beat estimates, reassuring investors concerned about a slowdown in technology spending.

Oracle jumped 6.5 percent in late trading after reporting second-quarter net income increased to $1.3 billion, or 25 cents a share. Sales gained 28 percent to $5.31 billion in the period ended Nov. 30, Redwood City, California-based Oracle said today.

Sales advanced more than 20 percent for the seventh straight quarter after Chief Executive Officer Larry Ellison spent $25 billion buying rivals and companies in new markets over three years. Oracle, which competes with SAP AG, said its expanding base of customers and products will help it weather an economic slump.

``A solid result in a challenging environment has to give investors a reason to cheer,'' Morgan Stanley analyst Peter Kuper said in an interview from Boston. He rates the shares overweight and said he doesn't own them. ``Oracle even beat our expectations for top-line revenue growth.''

Oracle gained $1.34 to $22.10 in extended trading. The shares fell 49 cents to $20.76 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has advanced 21 percent this year.

Forecast

Profit, excluding stock-based compensation costs, will rise to 29 cents or 30 cents a share in the current quarter, Chief Financial Officer Safra Catz said today on a conference call. Analysts in a Bloomberg survey estimate 29 cents.

Sales, including maintenance fees from acquired companies, will rise 20 percent to 23 percent, Catz said, suggesting sales of up to $5.47 billion. That compares with $5.2 billion, the average of estimates in a Bloomberg survey.

Oracle, which also competes with International Business Machines Corp. and Microsoft Corp., said it is taking market share from rivals.

Sales of new licenses, the key indicator of future growth among software companies, will advance as much as 25 percent to $1.74 billion, Oracle said. That compares with $1.62 billion estimated by Goldman, Sachs & Co. analyst Sarah Friar.

``With a company of Oracle's size, you feel more confident they are being conservative and not giving themselves some huge bar to trip over,'' Friar said in an interview. She recommends buying Oracle shares and doesn't own any.

Technology Budgets

While technology budgets will rise 8 percent to $3.1 trillion this year, growth will slow to 5.5 percent in 2008, Stamford, Connecticut-based Gartner Inc. said in October. In a survey of 37 companies, 61 percent expected their software budgets to decline or be little changed in 2008, San Francisco- based JMP Securities LLC said this month.

``We read the same newspapers you do and we take those reports into account when we think about the business,'' Catz said today. ``We have a broad, highly diversified customer base.''

Oracle sells database products, middleware software that helps different types of programs share information, and business-management applications for handling such tasks as accounting, merchandising and logistics.

Profit Estimates

Sales that include maintenance fees from acquired companies were $5.36 billion in the second quarter, beating the $5.03 billion average estimate of analysts in a Bloomberg survey. Excluding stock-based compensation costs, profit was 31 cents a share, compared with the 27-cent estimate of analysts.

In the second quarter last year, Oracle reported net income of $967 million, or 18 cents a share.

Sales of new licenses gained 38 percent to $1.67 billion. In September, Oracle forecast that sales of new licenses would rise as much as 25 percent, to $1.51 billion.

The company used its $10.3 billion purchase of PeopleSoft Inc. in January 2005 to become the second-biggest maker of business applications, after SAP. Since then, Oracle has bought 35 more companies, primarily to add business-management applications.

Oracle has expanded beyond financial and human-resources applications, and now offers business-management programs for specific industries, such as telecommunications. That strategy gave Oracle programs for functions such as regulatory compliance and billing, which customers can't delay buying, Ellison said.

`More Resilience'

``That gives us more resilience during a downturn than our friends in Germany,'' Ellison, 63, told analysts. SAP is based in Walldorf, Germany.

Sales of new database licenses, which include databases and middleware-server software, rose 29 percent to $1.12 billion. Application license sales advanced 63 percent to $553 million, Oracle said.

Customers buying new programs must also sign maintenance contracts, the only way they can receive software updates that fix bugs and add features. Revenue from maintenance contracts gained 24 percent to $2.49 billion in the quarter, Oracle said.

Last quarter, the company failed in its $6.7 billion hostile bid for BEA Systems Inc. Buying BEA would help Oracle challenge Armonk, New York-based IBM for the lead in the middleware market.

Oracle said today it had been in contact with BEA again in recent weeks.

``No friendly deal can be done with the current BEA board at a price and terms acceptable to Oracle,'' Catz said.
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