Oracle Has a Q2 Earnings Drop
Oracle's earnings dipped slightly in the second quarter, but still met analyst expectations, at $798 million, or 15 cents per share, during the period ending November 30, 2005. That represented a 2 percent decrease from $815 million, or 16 cents per share, at the same time last year. Total revenue for Oracle's fiscal second quarter totaled $3.3 billion, a 19 percent increase from the $2.76 billion for the same quarter last year. This difference is largely a result of gains the company has made through acquisitions, most notably, its $11 billion takeover of PeopleSoft, according to the company.
After disappointing Wall Street last quarter, investors and industry analysts were looking for Oracle to show renewed strength in its core database business, which has slowed recently. Oracle managed to post an 8 percent growth in database license sales growth, according to results released Thursday. Oracle is the database leader, with about 41 percent of a global market estimated at $15 billion in 2004, followed by IBM at 30 percent and Microsoft at 14 percent, according to research from IDC.
This slower growth in the database industry could be a result of the company beginning to build its line of business applications software, according to industry analysts. "It's a little early to tell how everything will work out, but they are under tremendous pressure to show they have been making wise investments," says Judy Sweeney, research director at AMR Research.
Besides PeopleSoft, the company has completed a number of smaller acquisitions as it gears up to take over Siebel Systems in a $5.85 billion deal expected to close in early 2006. With this expansion, Oracle is betting it can boost its profits by lowering expenses and winning more corporate customers as it attempts to mount a more serious challenge to SAP, the leader in business applications software.
Echoing a familiar theme, Oracle executives said during a conference call Thursday that the PeopleSoft deal is working out even better than expected. PeopleSoft customers are buying more software and renewing maintenance contracts more frequently since the takeover, according to Copresident Safra Catz. Oracle's new product licenses increased to $1.06 billion, a 9 percent increase, while Oracle's business applications software sales totaled $266 million, a 24 percent increase from the same time last year. Catz predicts Oracle's progress will become more apparent when SAP releases its quarterly results next month. "I think they will be hard pressed to beat our applications growth."
In the meantime, rival SAP continues to attempt to undermine Oracle by depicting the company as having to blend too many disparate software systems. "The vision and strategy they have gone for is very flawed," said Bill McDermott, SAP America's chief executive, in a written statement.
The Competitive Threat
SAP, Onyx, and others look to seduce leery customers.
Oracle Loses Another CFO