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Oracle Sees Other Takeover Targets

The database giant, whose quarterly profit is up 15%, is eyeing more than just PeopleSoft.

June 16, 2004|Joseph Menn | Times Staff Writer

For Oracle Corp., the attempted $7.7-billion purchase of PeopleSoft Inc. may be just the beginning.

Oracle Chairman Jeff Henley said Tuesday that the software maker had other major acquisitions in mind and hoped to complete them within the next few years regardless of whether it prevailed in its hostile bid for rival PeopleSoft.

"All of them would be multibillion dollars," Henley said in a conference call with reporters after Oracle reported a 15% increase in fiscal fourth-quarter earnings. Some "would be in either new areas or industries."

Oracle Chief Executive Larry Ellison has said that he wants the Redwood City, Calif., database company to play a leading role in what he predicted would be a wave of consolidation in the software industry. Henley's comments gave a new sense of the scope and urgency of those designs.

Asked whether Oracle was in talks with another big target, Henley declined to say. Earlier in the call, he noted that Oracle cut back on its share repurchases in the fiscal year ended May 31 as it built a war chest for takeovers.

Said Sanford C. Bernstein & Co. analyst Charles Di Bona: "Stepping into new areas that are related to their core franchise I think makes a lot of sense."

In the fourth quarter, Oracle said, earnings rose to $990 million, or 19 cents a share, on a continued resurgence in its core database business. A year before, it earned $858 million, or 16 cents a share. Revenue increased 9% to $3.08 billion, led by a 15% jump in sales of new databases.

Market research firm IDC said this month that Oracle had increased its lead over IBM Corp. in the global market for the most powerful databases, taking in 40% of the total amount spent on new sales and renewal fees in 2003. IBM's share grew as well, to 31%, but more slowly.

Not everything Oracle reported about the quarter was rosy. Sales of new business-application programs -- the type Oracle is hoping to bolster -- dropped 6% to $231 million.

Oracle shares rose 17 cents to $11.71 in regular trading on Nasdaq, then fell to $11.42 in late trading after the earnings report.

For the full year, Oracle earnings rose 16% to $2.68 billion, or 50 cents a share, from $2.31 billion, or 43 cents a share. Revenue increased to $10.2 billion from $9.48 billion. New database sales grew 10% in the year, and new applications gained 2%.

Henley said the economy was continuing to improve in the Americas and in most of Asia and Europe, and he predicted that Oracle would earn 9 cents a share in the current quarter, in line with Wall Street's previous expectations.

"We are a reflection of what's going on in the market," said Henley, who is planning to step down as Oracle's chief financial officer as soon as a replacement is hired. "We're benefiting from more business optimism."

Neither Henley nor Ellison said much about the ongoing trial in San Francisco, in which the U.S. Justice Department is trying to persuade a federal judge to block Oracle's tender offer for PeopleSoft on antitrust grounds.

But Oracle attorneys have expressed growing confidence since the trial began last week, and PeopleSoft's share price has risen as investors give Oracle better odds of prevailing.

Among other things, Oracle contends in the case that Microsoft Corp. may soon provide fierce competition in the market for big-business software that performs such tasks as payroll and benefits management.

Testimony by a Justice Department witness last week lent credence to that argument. BearingPoint Inc. executive Perry Keating told U.S. District Judge Vaughn Walker that Microsoft planned to combine products it was acquiring and offer them to big businesses.

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