Oracle profit rises 4 pct sales drop 5 pct as businesses stay tightfisted; shares fall

By Jordan Robertson, AP
Wednesday, September 16, 2009

Oracle net rises 4 pct but sales drop, stock slips

SAN FRANCISCO — Oracle Corp.’s profit rose 4 percent in the latest quarter, matching Wall Street’s forecasts, despite a drop in sales that revealed businesses are still being tightfisted about buying new software.

The sales figure was short of analysts’ expectations, and Oracle’s shares fell 4 percent.

The company’s results, reported after the market closed Wednesday, reflect a familiar pattern that has emerged for Oracle during the recession.

Oracle’s sales of new software licenses fell 17 percent to $1 billion, while revenue from software updates and technical support contracts climbed 6 percent to $3.1 billion. While many businesses are still reluctant to pay for new software, existing Oracle customers usually pay the company to do the follow-up work on software they’ve already bought, which explains why the numbers sometimes go in different directions.

The rise in support work helped lift Oracle’s net income for the June-August quarter to $1.12 billion, or 22 cents per share, versus $1.08 billion, or 21 cents per share, in the same quarter a year ago.

Excluding one-time items, profit was 30 cents per share, matching the average estimate of analysts polled by Thomson Reuters.

Sales fell 5 percent to $5.05 billion, short of expectations for $5.25 billion. Oracle said sales would have fallen just 1 percent were it not for currency fluctuations, which change the value of deals done in other currencies when they’re converted into dollars.

Guidance for the September-November quarter, Oracle’s fiscal second quarter, were in line with analysts’ projections.

Oracle expects profit of 35 to 36 cents per share, excluding one-time items. Analysts predicted 36 cents per share, on average. Revenue is expected to be flat to up 3 percent over last year, which translates to a range of $5.6 billion to $5.77 billion. Analysts expected $5.72 billion.

Oracle sees revenue from new software licenses coming in flat to down 10 percent over last year.

The stock fell 91 cents, or 4.1 percent, to $21.22 in after-hours trading, likely on disappointment about the revenue shortfall. The shares had closed down 53 cents at $22.13 during the regular session.

Oracle is the world’s No. 1 seller of database software, which companies use to archive and retrieve data such as payroll or customer information. Based in Redwood Shores, Oracle is also a major player in the “middleware” market, which refers to software that allows computing applications to talk to each other.

The company, run by billionaire Larry Ellison, is trying to branch out by buying struggling computer server maker Sun Microsystems Inc. for $7.4 billion, a deal that would thrust Oracle into the hardware market, a new area for the company.

The deal is being held up by European Union antitrust regulators, who are worried about Oracle’s plans for Sun’s MySQL open-source database, which is popular among Web companies and competes against Oracle’s proprietary database. The underlying programming code for open-source software is distributed for free on the Internet; companies make money off it by selling support contracts for products built from that code.

There’s still uncertainty about how the transaction will play out, but Oracle is moving ahead with plans for Oracle-Sun products. On Tuesday the companies announced a new “database machine,” which combines Oracle’s software with Sun computers. Oracle had previously made such a system with Hewlett-Packard Co.

Oracle also said Wednesday that its board of directors has declared a dividend of 5 cents per share for shareholders as of Oct. 14. The dividend will be paid Nov. 4.

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