Oracle has reported revenue and earnings growth in its
first quarter, with its revenue from new software licences rising
7%, to $563m (£314m).
Oracle posted revenue of $2.22bn for the quarter ended 31
August, also up 7% from the same quarter last year.
Net income was $509m, up 16% from last year. Chief financial
officer Harry You said Oracle's trailing 12-month operating income
of $4bn and operating margin of 38.5% were all-time highs.
Revenue was slightly below analysts' $2.23bn mean estimate.
Oracle's general and administrative expenses grew sharply over
past year as it spent $28.5m on its campaign to acquire
PeopleSoft.
Its sales and marketing, product support, research and
development, and administrative costs all rose but it kept its
total operating expenses nearly flat by trimming its services costs
by 5%, saving $23m.
Core database sales drove Oracle's software sales growth, and
Oracle president Charles Phillips said its advantage over rivals in
that market is clear. "We have grid, they don't," he said.
Growing industry interest in deploying distributed computing
platforms is driving sales of Oracle's grid-enabling database
technology, he said.
Sales of new licences for applications plunged from last year's
first quarter, however, falling to $69m, a 36% decline. Oracle's
total applications revenue, including support and services, fell 9%
to $497m.
Phillips and other Oracle executives downplayed the seriousness
of the applications sales decline. You, who joined Oracle two
months ago from Accenture, said the company was unhappy with the
applications results but expects growth in later quarters.
Phillips said Oracle is restructuring its applications sales
group, creating a dedicated sales force in each geographic region.
It is also rolling out a major update of its E-Business Suite,
version 11i10, that Phillips expects to spark sales growth.
Oracle's services group also showed declines, as services
revenue fell 7% to $476m and consulting revenue slipped 11%. Those
declines, however, were expected, and will probably continue
throughout the financial year, You said.
Oracle, along with its customer companies, is increasingly
tapping lower-cost labour in developing countries for IT services
work, and its billing rates are lower for those consultants, he
said. He also said Oracle's increasing reliance on outside partners
has reduced its services revenue.
Oracle's trend toward hiring in developing countries is evident
in its headcount numbers. Its US headcount fell, as it did every
quarter last year, to 16,500 - about 1,000 fewer US workers than it
had at the end of last year's first quarter. However, its
international headcount grew by nearly 3,000, raising its total
employee roster to 42,100.
You said Oracle is optimistic about its growth for the rest of
the financial year. "We appear to have powered through a lull in
the economy," he said. "The software industry [trend] is the strong
becoming stronger and the weak becoming weaker and less relevant to
the market."
Executives briefly addressed Oracle's campaign to take over
PeopleSoft through a hostile, $7.7bn tender offer to PeopleSoft's
shareholders.
Oracle remains committed to acquiring PeopleSoft but still faces
two major hurdles, according to president Safra Catz. Winning
approval for the deal from the European Commission, and the repeal
of PeopleSoft's "poison pill", an anti-takeover provision in
PeopleSoft's bylaws. Because of those obstacles, no deal is
imminent, Catz said.
Stacy Cowley writes for IDG News Service