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Oracle edges out estimates
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March 11, 1999: 8:42 p.m. ET
Shares tumble after hours amid disappointment over revenue growth
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NEW YORK (CNNfn) - Oracle Corp. Thursday edged out Wall Street estimates for third-quarter profits, but shares of the No. 1 database-software company fell sharply in after-hours trade amid disappointment over revenue growth.
The Redwood Shores, Calif.-based company's third-quarter earnings climbed 36 percent to $293 million, or 20 cents per share. Analysts polled by First Call expected Oracle (ORCL) to log a profit of 19 cents per share.
The company also posted revenue of $2.1 billion, a 19-percent gain from the $1.7 billion in revenue in the year-ago quarter. Analysts, however, had expected 26-percent revenue growth.
Oracle shares fell 1-1/16 to close at 36-7/8 ahead of its earnings announcement, then tumbled to 32 in after-hours trading.
Oracle attributed much of its record third-quarter performance to growth in its core database business. The company said its database revenue grew 20 percent over the last four quarters to $6 billion.
The company also reported a boost in its lagging applications business. Revenue from applications jumped 37 percent in the last four quarters to $2.3 billion. Oracle is the second-largest maker of software applications for corporate enterprises, behind Germany's SAP AG (SAP).
But Brian Goodstadt, an analyst at S&P Equity Group, noted that Oracle's license revenues grew only 6.6 percent in the third quarter.
"My estimate was closer to 20 percent," Goodstadt said, adding that issues related to the Year 2000 bug continue to hurt sales in the enterprise resource planning (ERP) segment.
Large businesses have been hesitant to commit to purchasing expensive ERP software until they have resolved all their Y2K issues.
"Y2K has probably affected the whole ERP industry," Goodstadt said. "Oracle's ERP licensing grew 5 percent, which is similar to its competitors."
Jeff Henley, Oracle chief financial officer, told CNNfn that the industry isn't likely to see a recovery from Y2K issues until the end of the year.
"Nobody knows exactly how this year is going to play out," Henley said. "We do know there was a bubble of spending for applications a year or two ago. The bubble kind of burst and for a few quarters the ERP market [has been] kind of soft. It's a tough environment."
Oracle executives have previously expressed their satisfaction in applications-business growth. In the second quarter, Oracle's applications revenues grew 19 percent.
"Underneath it all, if you normalize the numbers, we continue to show good growth in our license business," Henley said.
Goodstadt, however, said Oracle's license revenue problems continue to plague the company.
"Despite their talk, the applications business hasn't been growing much at all," Goodstadt said.
Oracle easily beat last-year's third-quarter results, when it posted a profit of $215 million, or 14 cents per share.
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Oracle
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