- The Washington Times - Wednesday, March 18, 2009

SAN FRANCISCO (AP) - Oracle Corp.’s latest quarterly profit dipped slightly as a stronger dollar and corporations’ reluctance to fork out for as many new software licenses dragged down results, but they still came in ahead of Wall Street’s tepid forecasts.

And in a rare sign of confidence these days, the Redwood Shores, Calif.-based company declared its first dividend, a surprise move that comes as other bellwethers are cutting or suspending their dividends to save money.

The news helped lift Redwood Shores, Calif.-based Oracle’s stock $1.11, or 7 percent, to $16.94 in after-hours trading. Shares had gained 43 cents, or 2.8 percent, to close the regular trading session at $15.83 before Oracle reported its results.

Oracle’s quarterly report demonstrates that the business software maker was able to sustain a better-than-expected pace of contract signings even as companies pull back on technology spending. A stronger dollar hurt results because deals done in other currencies weren’t worth as much in dollars.

Oracle’s chief executive, Larry Ellison, called the numbers a “tremendous achievement in the face of the serious slowdown in the world economy.”

In the latest period, Oracle’s fiscal third quarter, which covers December-February, Oracle said it earned $1.33 billion, or 26 cents per share, versus $1.34 billion, also 26 cents per share, in the year-ago period.

Subtracting out one-time charges, profit was 35 cents per share. That was 3 cents better than the average estimate from analysts polled by Thomson Reuters on that same basis.

Sales were $5.45 billion, a 2 percent increase over last year, though Oracle said revenue would have jumped 11 percent without the currency fluctuations. Analysts had predicted $5.42 billion in sales.

A closely watched number for Oracle is its sales of new software licenses, which is significant because it correlates to how much in support fees Oracle can hope to rake in in the future from those contracts.

That figure fell 6 percent to $1.5 billion, which was within the company’s guidance. Some analysts were projecting a far worse decline.

Oracle’s customers spent more in other areas, however. Sales from software license updates and product support were up 11 percent to $2.9 billion, which was more than half of Oracle’s total revenue for the quarter.

Oracle’s main business is selling database software and so-called “middleware,” which allows business computing applications to talk to each other _ both areas that are under pressure because of the economic malaise.

But a key part of that is locking customers into long-term support contracts for that software. The support deals cover things like fixing software bugs and performing upgrades.

Oracle faces intense competition for support contracts from outsourcers that can do the job cheaper, but Oracle is able to offer things like free license renewals as part of its support contracts to keep all the work in-house.

The company forecast weaker-than-expected numbers for the current period, which ends in May, but it wasn’t enough to depress the stock.

Sales are expected to fall 10 percent to 14 percent over last year, when factoring in currency fluctuations, which translates to a range of $6.23 billion to $6.52 billion in the fiscal fourth quarter.

Analysts were projecting about $7 billion in revenue.

Profit should be 42 cents to 46 cents per share, excluding one-time charges, Oracle said. That figure is also adjusted for expected currency fluctuations. Analysts were predicting 46 cents per share.

Trip Chowdhry, a senior analyst with Global Equities Research, said Oracle’s numbers “clearly indicate there was no market-share loss” in the latest quarter, though he questioned Oracle’s decision to issue a dividend instead of paying down debt from the company’s acquisition spree first.

“What Oracle is selling today is confidence,” Chowdhry said. “They had good execution in a terrible environment, but I am concerned about the timing, the amount and the reasons for the dividend.”

Oracle’s cash dividend will pay 5 cents per share to stockholders of record as of April 8.



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