Oracle posts database-driven Q3 growth
Executives cited strong sales for the revenue growth
IDG News Service - Oracle Corp. reported solid third-quarter results yesterday, meeting analysts' expectations and posting revenue growth in a quarter that executives said was marked by strong sales in the company's database business.
Particularly noteworthy were sales of Oracle's RAC (Real Application Clusters) technology, CEO Larry Ellison said in a statement. The technology lets companies run their databases across groups of servers, and its rising sales numbers show that customers are building database grids, he said.
Oracle's revenue for the quarter, which ended Feb. 29, totaled $2.5 billion, up 9% from a year earlier. Net income rose 11%, to $635 million. Oracle posted per-share earnings of 12 cents, in line with the consensus mean estimate of analysts polled by Thomson Financial/First Call.
Sales of software update licenses and product support remained Oracle's biggest revenue generator, growing to $1.2 billion during the quarter. Revenue from new software licenses also rose, while services revenue dropped 11% year over year, to $486 million.
Oracle's continuing campaign to acquire rival PeopleSoft Inc. cost $58 million in professional services fees during the quarter, Oracle said.
While Oracle's database business continued its 2004 pattern of quarterly gains over 2003's results, its applications business maintained its pattern of quarterly declines. New software license revenue held steady against last year's third quarter, and revenue from updates and support rose. But services revenue dropped, leading to a 5% decline in total applications revenue, to $580 million.
In a conference call with analysts, Ellison attributed the decline in applications revenue to a "brutally competitive" industry. While Oracle faces intense pricing pressure from Microsoft Corp. and IBM in its database business, it has the advantage of unique database technology with features unmatched by its rivals, he said.
Ellison cast Oracle's services revenue declines as a consequence of its success in making its products easier to install and maintain. That business offers the lowest profit margins for Oracle, he said. Growth in revenue from the company's high-margin maintenance and updates business is a sign that Oracle is "reshaping" in advantageous ways, he said.
Oracle's head count increased in the quarter to 41,194, its highest level in the past year and a half. Most of the growth came internationally. The company's U.S. head count continued a decline, to 16,908.
Meanwhile, mounting industry concerns about outsourcing, a term now commonly used to refer to the practice of moving jobs out of the U.S. and into developing nations where labor is less costly, prompted Oracle to make a change during the quarter: It is renaming its Oracle Outsourcing managed applications business. Using IBM's favorite mantra, Oracle will
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