Oracle revenue jumps 26% in Q4

Assimilation of PeopleSoft is officially complete

Oracle has reported a big jump in revenue for its fiscal fourth quarter, driven by its merger with PeopleSoft and strong sales from all product categories, the company said on Wednesday.

Revenue for the period, which ended May 31, came in at US$3.88 billion (NZ$5.55 billion), up 26% from a year ago. Sales of new applications licenses were especially strong, growing 52% to US$350 million, the company says.

Net income for the quarter was US$1.02 billion, up 3% from a year earlier. Earnings grew 4% to US$0.20 per share, Oracle says.

The figures are according to generally accepted accounting principles, or GAAP. Oracle's non-GAAP earnings, which exclude one-time charges and other items, grew 36% to US$0.26 per share, the company says. That beat the consensus analysis estimate of US$0.23 per share, according to Thomson First Call.

"The very strong quarter across our entire business — database, applications and middleware — capped a great year for Oracle," said Safra Catz, Oracle co-president and interim chief financial officer, in a conference call to discuss the results.

She raised Oracle's earnings forecast for the current fiscal year, to between US$0.78 and US$0.81 per share. The mean analyst estimate is for US$0.78 per share.

Total software revenue increased by 24% from a year ago, to US$3.1 billion. Of that, new licence revenue grew 23% to US$1.6 billion and licence updates and product support revenue grew 26% to US$1.5 billion. Revenue from services revenue grew 35% to US$755 million, Oracle says.

New licence revenue from database and middleware grew 16%. The database business was driven by optional add-ons including RAC, or Real Application Clusters, a technology for stringing smaller database servers together into a larger system. RAC sales grew 27% from a year ago, Larry Ellison, Oracle's chief executive officer, said in a conference discussing the results.

"It's the most important feature we have that differentiates us from Microsoft at the low end and IBM at the high end," he says.

Oracle would not break out results from its PeopleSoft acquisition, making it hard to gauge the success of its former applications business. Doing so would be "irrelevant", because the integration of the two groups is now complete, according to Catz. "There are no PeopleSoft salesmen or Oracle salesmen," she says.

Oracle has said it probably won't make another acquisition on that scale soon, although it has continued to gobble up smaller companies.

"We have no plans to buy anything that doesn't contribute to our long-term strategy and profit growth targets of 20% per year over the next five years," Ellison says. "We won't do anything to jeopardise those goals."

Ellison argues that Oracle is growing its database business at the expense of IBM, its main rival. He points to recent market share reports from IDC, Gartner and Morgan Stanley, all of which show Oracle gaining share. "We believe people are moving from mainframes and large-scale systems to Oracle grid," he says.

Still, Gartner's figures show Microsoft, while still in third place, growing its database business fastest of all.

Oracle's Java middleware products will work with other vendors' databases and application servers, Ellison says, but the company is still not saying if the applications it acquired from PeopleSoft will continue to run on other databases.

"The answer is we haven't made that decision yet," Ellison says. "Were talking to customers and seeing what their priorities are and we'll make a decision sometime in the future."

If Oracle decides not to support other databases, former PeopleSoft customers using IBM and Microsoft databases would have to switch to Oracle or change to another vendor's applications.

Oracle has hired Tod Nielsen, a former Microsoft executive who was most recently BEA Systems' chief marketing officer until he left that company last year, Ellison says. Nielsen will run the middleware business alongside Thomas Kurian.

It's one of several recent management changes at Oracle. Last week the company said it had hired Greg Maffei, another former Microsoft executive, who will be chief financial officer starting in July. He is also one of three presidents at Oracle, along with Catz and Charles Phillips.

"As the business continues to grow and diversify we have to continue to grow our management team," Ellison says.

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