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ECommerceTimes.com

Oracle Beats Estimates; Says Worst Is Over

By Lisa Gill
Dec 19, 2002 12:15 PM PT

The number two software supplier Oracle said Wednesday it had beaten its own conservative quarterly estimates and indicated the company's financial downturn may be coming to an end.

Oracle's quarterly revenue of US$2.31 billion fell from last year's $2.38 billion. But the figure still beat out Wall Street earnings expectations of 8 cents a share on $2.2 billion in revenues, according to First Call research firm.

One of the company's main indicators of strength is in its licensing revenues, which were $765 million, a 7 percent drop from last year. License updates and product support revenues increased 8 percent to $954 million, as revenue from services dropped 11 percent to $590 million.

Database revenues inched upward from last year to $643 million, as Oracle applications dropped 34 percent to $108 million. Overall, database sales represent 81 percent of the company's overall business, while applications comprise the remaining 19 percent.

Oracle Beats Estimates; Says Worst Is Over

End in Sight?

Oracle's CFO Jeff Henley told analysts in a conference call the company was more optimistic than it had been in two years since the industry took a downward turn. Henley also indicated the company may have "bottomed out."

Should Oracle be able to post higher total revenues in its third financial quarter than its year ago period, it would break a seven-quarter decline.

While Oracle has forecasted positive growth for the second half of its fiscal year, said Mike Trigg, stock analyst for Morningstar.com, whether the company can meet those numbers in a "tough" next quarter remains to be seen.

"They are calling for positive year-over-year revenue growth next quarter, and that backs up what they've said in terms of having seen a bottom," said Trigg.

"Business has definitely improved, but we're far off from what I would deem a recovery in IT spending," he added.

Stock Upgrade

Robert Breza, analyst at A.G. Edwards & Sons told E-Commerce Times the firm upgraded Oracle stock from "hold" to buy today after yesterday's earnings announcement.

Breza pointed to a database revenue increase of 18 percent sequentially, while the applications business rose sequentially 4 percent, and indicated the rate of the company's decline has "slowed."

A reorganized, more specialized North American sales force, along with an anticipated improvement operating margins and economic outlook in general has led the firm to push Oracle's stock rating higher.

Cost-Cutting Measures

Oracle's second quarter operating margin was at 34 percent, equal to last year, while the company has reduced its workforce by 850 jobs this quarter.

Henley reportedly anticipated that the company will lay off several hundred more employees next year.


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