Oracle beats the Street

June 18, 2001: 6:41 p.m. ET

Software maker sees slightly lower sales, on track for first quarter

NEW YORK (CNNfn) - Software maker Oracle Corp. on Monday reported a fiscal fourth-quarter profit that beat the Street's expectations on sales that came in slightly below estimates.

Executives also said they expect to meet earnings expectations for the current quarter, which would match the results the company reported during the same period last year; that provided a generally upbeat outlook for the company moving forward.

"It feels to us like in Q4 we hit the bottom, and if anything, demand may be getting a bit better in Q1," Jeff Henley, Oracle's chief financial officer, told analysts during a teleconference Monday evening.

After the close of trading, Oracle, the world's second-largest independent software company, said it earned $855 million, or 15 cents per share. That compares with $925.9 million or 15 cents per share during the same quarter a year earlier and is a penny better than the 14 cents per share analysts had generally expected, according to a survey conducted by earnings tracker First Call.

The year-ago earnings were reported on an adjusted basis, stripping out big profits from the sale of shares in Oracle Japan. Including those profits, the company's earnings would have been $4.9 billion, or 82 cents per share.

At $3.3 billion, Oracle's fiscal fourth-quarter sales fell slightly from $3.4 billion during the year-ago quarter, where analysts had expected sales to be roughly flat, according to the First Call survey.

Shares of Oracle (ORCL: down $0.16 to $14.84, Research, Estimates) fell in Nasdaq trading ahead of the earnings report, which was released after the closing bell. They gained $1.38 to $16.12 in extended-hours trade.

Looking ahead, Henley said he expects Oracle's fiscal first-quarter revenue to be flat, with the $2.26 billion the company reported during the year-ago quarter, and its earnings to be 8 cents per share, which is in line with the Street's current consensus estimate.

He said several factors, including the Federal Reserve's moves to cut interest rates and the tax-cut recently enacted by Congress, have lifted some of the uncertainty surrounding the outlook for the U.S. economy, which could prompt corporations to re-implement their deferred information technology (IT) spending plans.

"In addition, our sales force is getting smarter about how to sell in this environment," Henley added. "Finally, high (return on investment) projects around e-business can only get delayed so long before management decides they need to press ahead."

When Oracle reported its fiscal third-quarter results in March, executives said they were aiming for a fiscal fourth-quarter profit of 15 cents per share. The estimate of the 33 analysts First Call polled ranged between 12 cents and 16 cents per share, reflecting the split body of opinion that has been developing on the Street about the company's prospects.

Some analysts recently have affirmed their belief that the company's toughest times are behind it and that its end markets are firming, especially in the United States. They also pointed to a range of recently implemented cost-cutting measures as a sign that things are turning for the better. The more bearish analysts argued that Oracle's core database business will face continued pressure from sluggish economic conditions in the U.S. and abroad as well as more aggressive pricing from its competitors.

Oracle last week began shipping its latest database software package, called "9i."

Historically, Oracle has focused on database software, a market which is slowing and expected to grow only modestly in the future. In calendar 2000, the company's database software sales were $2.97 billion, compared with $2.65 billion from IBM and $1.31 billion at Microsoft, according to figures compiled by tech research firm Gartner Dataquest.


	Larry Ellison Chief Executive, Oracle

The company recently has begun the transition to e-business applications, introducing its "11i" e-business application suite a year ago, and has identified that market as an important area of growth

During the teleconference, Larry Ellison, Oracle's chief executive, held up several contracts the company has inked with major companies, including General Electric, as proof that its new strategy is taking hold.

Ellison, in an interview on Lou Dobbs Moneyline, said he expects technology demand would get better in the company's first quarter. (477KB WAV)(477KB AIFF)

"We highlighted 10 of our more than 450 customers that are currently live after just one year of the e-business suite," Ellison said.

"A year from now, we'll have over 4,000 customers live on the e-business suite," Ellison said, noting that the company currently has 3,500 ongoing implementations of that software.

"An untested idea has now become proven technology," Ellison said. "If the best managed, largest company in the world can use it, so can everybody."