UPDATE: Oracle 4Q Net Down 7.2% On Stronger Dollar, Econ Weakness
June 23 2009 - 4:34PM
Dow Jones News
Oracle Corp.'s (ORCL) fiscal fourth-quarter profit declined 7.2%
as the stronger dollar and continuing economic weakness weighed on
revenues and earnings.
But stronger-than-expected new license sales and continuing cost
management helped the company beat Wall Street expectations, giving
some comfort that the company is weathering the storm.
Shares were up 2.8% at $20.44 in recent after-hours trading,
reflecting broad comfort that the company is managing well through
the downturn. Oracle's stock has been rebounding since hitting a
three-year low in March.
The Redwood City, Calif.-based database and business software
giant has been hurt by current impacts over the past three
quarters, and a decline in revenue in the latest quarter highlights
how tech companies are still facing a difficult economic
climate.
Oracle, which has spent roughly $30 billion on acquisitions in
the past four years to boost its portfolio of products, made a
surprise bid for Sun Microsystems Corp. (JAVA) in April, which
brings it into the technology hardware sector for the first time in
a significant way. Oracle has a strong track record with
acquisitions, which have added to both top-line and earnings
growth, but investors will be watching keenly for detail on how the
company plans to generate value from its new hardware assets.
For the quarter ended May 31, Oracle reported earnings of $1.89
billion, or 38 cents a share, down from $2.04 billion, or 39 cents
a share, a year earlier. The stronger dollar reduced earnings by 5
cents a share in the latest quarter.
Excluding stock-based compensation, restructuring and
acquisition-related costs, earnings fell to 46 cents a share from
47 cents. Assuming fixed exchange rates, the latest figure would
have been 51 cents.
Revenue fell 5% to $6.86 billion, but would have risen 4% if
currency rates were constant. Software revenue dropped 3% and
services revenue slid 16%. At fixed exchange rates, software
revenue rose 6%, while services revenue fell 7%.
Analysts were expecting earnings, excluding stock-based
compensation, restructuring and acquisition costs, of 44 cents, on
revenues of $6.47 billion, according to a Thomson Reuters
survey.
In March, the company said it expected earnings of 42 cents to
46 cents a share on a 10%-to-14% drop in revenue, assuming the
currency exchange rates at the time of the projection.
Operating margins, meanwhile, rose to 42% from 40.8%.
New license revenue, a key measure of software growth, dropped
13% to $2.7 billion, and fell 4% assuming exchange rates held
steady. In March, Oracle had predicted a 5%-to-15% decline at
constant currency rates.
Analysts were expecting new software license revenues of around
$2.5 billion, according to a survey by Thomson Reuters.
President Charles Phillips said the company took market share
from rival SAP AG (SAP) in every region of the world. Phillips said
in Europe, for example, business increased 5% in constant currency,
compared with a decline of 27% for SAP in their most recent
quarter.
-By John Kell, Dow Jones Newswires; 201-938-5285;
john.kell@dowjones.com
-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455;
jessica.hodgson@dowjones.com