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Oracle Posts 16% Rise in Net Income

The company credits stronger database sales. Its call with analysts is notable for the absence of CEO Larry Ellison.

September 15, 2004|Joseph Menn | Times Staff Writer

Stronger database sales fueled a 16% jump in Oracle Corp.'s fiscal first-quarter profit, but revenue from smaller business programs dropped by a third -- underscoring the software giant's rationale for pursuing a takeover of PeopleSoft Inc.

Net income at Redwood City-based Oracle rose to $509 million, or 10 cents a share, from $440 million, or 8 cents, a year earlier. Sales grew 7% to $2.2 billion in the period ended Aug. 31; they would have increased 3% without currency fluctuations.

Sales of new databases jumped to $494 million from $418 million, which encouraged investors concerned about the growth prospects in Oracle's strongest business. Updates and support revenue for both database and other programs also rose, while service revenue fell.

But sales of new programs for managing payroll, accounting and other tasks -- the business Oracle is trying to broaden with its hostile bid for PeopleSoft -- fell to $69 million from $107 million.

Oracle executives said they believed the slip was a "one-quarter aberration" in what is typically a light and volatile period for the company's sales. They predicted that growth in the area would resume in the quarter just begun.

"It's a small number in a small quarter," Oracle President Charles Phillips said in a conference call with analysts and investors.

Oracle's management also said it would press ahead with efforts to acquire Pleasanton, Calif.-based PeopleSoft, emboldened by last week's federal court ruling striking down an antitrust challenge from the Justice Department.

"We have reached out to PeopleSoft's board and advisors, and we are hopeful that these contacts will prove to be fruitful," Oracle Chief Financial Officer Harry You said.

Safra Catz, also a president at Oracle, said no transaction was imminent, noting that the European Union had yet to decide whether to try to block the deal. The $7.7-billion takeover would make Oracle the No. 2 provider of business management software, after SAP of Germany.

Oracle founder and Chief Executive Larry Ellison didn't participate in the call Tuesday, though he traditionally has done so. Chairman Jeff Henley said the company had decided that the outspoken executive would step back from the calls.

Ellison's absence prompted speculation that Oracle was trying hard to turn the bid for PeopleSoft into a friendly deal. Ellison has denigrated the firm and its CEO, former Oracle executive Craig Conway.

"He's always been on the call," said Banc of America Securities analyst Robert Stimson, who owns no stock in individual companies. "They're keeping him quiet right now because anything he says about PeopleSoft would probably be in the wrong light."

Stimson also said Ellison's absence completed a changing of the guard that included You's recent appointment and Henley's ascent to chairman.

"I see Larry wanting to be more Gates-like and be more visionary," Stimson said, referring to Microsoft's founder, chairman and former chief executive, Bill Gates.

Oracle's earnings topped its early forecasts by a penny a share, and the executives said they were comfortable with Wall Street expectations of a 13-cent profit in the second quarter. You said sales should come in at $2.58 billion to $2.66 billion, up 3% to 7% from the same period in 2003.

Oracle shares fell 7 cents to $10.55 in regular Nasdaq trading before the earnings release, then gained 33 cents in after-hours trading.

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