Acquisitions help Oracle profit touch record levels

The world's largest database and application software vendor, Oracle Corp. on Tuesday posted a better- than- anticipated quarterly profit and sales that surpassed Wall Street estimates, and touched the record levels when its new business software licence revenue surged, sending its shares up 13%, their highest since 2002.

Oracle also said, it posted its strongest first-quarter licence growth in more than five years, gained share across all its product lines and earlier estimated 22% to 24% revenue growth for the second quarter.

As the benefits of Redwood Shores, California based software company’s recent acquisition spree picked up steam, the company said its net income rose 29% to $670 million, or 13 cents a share, for the fiscal first quarter ended Aug. 31, compared to $519 million, or 10 cents per share, a year ago.

Oracle said that revenues were up 30 percent to $3.6 billion from $2.77 billion. Excluding options, expensing and one-time items, the information technology company reported profit of 18 cents per share for the period. Analysts on average were predicting Oracle to post a per-share profit before items of 16 cents on revenue of $3.47 billion.

Cheered with the news, investors showed their keen interest in the company shares, sending Oracle’s stock up 13.3% in yesterday’s after-hours trading, when it jumped $2.15 a share to $18.28. In regular trading, the stock had fallen 12 cents to $16.13.

Total software revenue rose 29% to $2.7 billion with database and middleware new license revenues up 15%. New licence revenue from applications increased 80% to $228 million, significantly surpassing a Wall Street target for a 66% gain and marking the third consecutive quarter of more than 75% growth. Services revenues were up 33% to $846 million, compared to the same quarter in earlier year.

Oracle Co-President and CFO, Safra Catz said, "We reported record revenues and earnings for the first quarter," adding further that "We exceeded our guidance on every metric and delivered strong revenue growth across all product lines and geographies. We are now in year three of our five year plan targeting EPS growth at 20% per year. We continue to deliver results comfortably ahead of target."

The company has spent nearly $20 billion over the past three years buying applications makers to gulp down its rivals. Those buyouts have included major applications makers such as PeopleSoft and Siebel Systems as well as specialized firms such as i-flex in banking software and Retek in retailing software.

Oracle's Chief Executive Larry Ellison said, that the acquisitions are helping it gain a tactical advantage over its key rival, German-based SAP, the No. 1 applications company.

"We're rapidly taking applications market share from SAP," said Oracle President, Charles Phillips in a statement. "Q1 was the second consecutive quarter that Oracle's applications new license sales growth was 80% or more. That's ten times SAP's 8% new license sales growth rate in their most recently completed quarter."