Originally created 06/17/04

Oracle remains on earnings upswing as it hunts for takeovers



SAN FRANCISCO -- Oracle Corp. continues to fatten its profits as corporate America regains its technology appetite, but the software giant remains hungry for an even larger slice of the action.

The Redwood Shores-based company registered its sixth consecutive quarter of double-digit earnings growth Tuesday, reporting a profit of $990 million, or 19 cents per share, for the three months ended May 31. That represented a 15 percent improvement from net income of $858 million, or 16 cents per share, at the same time last year.

Quarterly revenue totaled $3.08 billion, a 9 percent gain from $2.83 billion last year. The quarter marked the final three months of Oracle's fiscal year - generally the company's peak sales period.

The earnings were a penny above the mean estimate among analysts surveyed by Thomson First Call.

The quarter wasn't entirely rosy for Oracle as the company faltered in its licensing of business applications software - the computer coding that automates a wide range of administrative tasks. The company's sales in this niche totaled $231 million, a 6 percent decline from $246 million last year.

Shares in Oracle stumbled as well, falling 37 cents, more than 3 percent, to $11.34 in early trading Wednesday on the New York Stock Exchange.

Oracle hopes to set the table for even more robust financial gains by acquiring one of its fiercest rivals, PeopleSoft Inc., and perhaps several other software makers.

"We believe we can absorb PeopleSoft if it comes to pass and it wouldn't be too large of a distraction to keep us ... from doing something else," Oracle Chairman Jeff Henley told reporters Tuesday. Oracle has already offered $7.7 billion for PeopleSoft, and may still launch other multibillion dollar takeover bids during the next year, Henley said.

Although Henley declined to identify Oracle's potential targets, industry analysts have listed BEA Systems Inc., Siebel Systems Inc. and Mercury Interactive Corp. as possible prey.

Oracle's takeover desires so far haven't distracted the company from improving its profits on its own, boosted by a gradual recovery in corporate spending after the dot-com implosion of 2000 triggered a devastating tech downturn.

"Clearly, we are benefiting from more business optimism and people starting to spend a little more than they have been," Henley said. "We believe things will continue to show modest improvement in the next year. We don't think this (trend) is over yet."

Oracle is widely regarded as a software industry bellwether because of its size and the timing of its fiscal quarter. The quarter ends a month before most of its major rivals close their books.

The quarter wasn't entirely rosy for Oracle as the company faltered in its licensing of business applications software - the computer coding that automates a wide range of administrative tasks. The company's sales in this niche totaled $231 million, a 6 percent decline from $246 million last year.

With sales of Oracle's main database products still rising, the company's new licenses for all software totaled $1.31 billion, an 11 percent improvement from last year's $1.19 billion.

The latest results continue Oracle's recent earnings upswing. The company's profit has climbed by at least 10 percent in every quarter since the end of 2002.

Despite the better times, Oracle CEO Larry Ellison believes Silicon Valley's boom days are largely over, compelling his company to spend the past year stalking PeopleSoft.

But that proposed deal remains highly uncertain, with the U.S. Department of Justice seeking to block Oracle in monthlong antitrust trial about to enter its seventh day of testimony. The Justice Department, backed by 10 states, alleges an Oracle takeover of PeopleSoft would diminish competition in the business applications software market.

Oracle is digging even deeper into its pockets to try to prove the government wrong. The company had spent about $60 million pursing PeopleSoft through May, Henley said.

Oracle ended May with $6.5 billion in cash, down from $8 billion at the end of February. Henley said Oracle plans to squirrel away more cash in the months ahead to help pay for the company's anticipated shopping spree.

For its full fiscal year, Oracle earned $2.68 billion, or 50 cents per share, on revenue of $10.16 billion. Last year, the company earned $2.31 billion, or 43 cents per share, on revenue of $9.48 billion.