Good Times Keep Rolling At OracleGood Times Keep Rolling At Oracle

Oracle's legal fight to take over PeopleSoft hasn't diminished its appeal to customers as businesses continue to open their wallets for new technology.

Oracle, which is fighting the Justice Department for the right to acquire its rival, closed its fiscal year on a high note Tuesday, posting increased revenue and profit for the fourth quarter and year ended May 31. Operating margin was at an all-time high, and software license sales more than made up for a dip in service revenue.

The maker of database software posted fiscal fourth-quarter earnings of $990 million, or 19 cents per share, up 15% from $858 million, or 16 cents per share, during the year-ago period. It's the sixth consecutive quarter in which earnings rose by double digits. Profits have climbed by at least 10% in every quarter since the end of 2002, a stretch marked by a recovery in corporate spending after the tech downturn.

Fourth-quarter revenue was $3.08 billion, up 9% from the same quarter a year earlier. The results came in at the high end of the company's forecast. New license sales grew 11% to $1.31 billion, versus $1.19 billion.

During the year, Oracle saw a notable bounce-back for its applications revenue, which rose 2% after falling 14% in fiscal 2003, and CFO Jeff Henley told analysts during a conference call that the company has a chance to seize a larger share of the application server market as BEA Systems' share shrinks. Henley also noted that Oracle has secured 3,000 new entry-level customers with its stripped-down database software offering for midsize customers. "Clearly, 2004 was a year of recovery and demand," Henley said of the recently completed fiscal year.

For the full year, Oracle reported a profit of $2.7 billion on revenue of $10.2 billion, compared with a profit of $2.3 billion on revenue of $9.5 billion a year earlier.

During the analyst call, CEO Larry Ellison cited a number of factors for the company's continued strength, including the continued shift of revenue away from services and toward software-license-subscription renewals, and the impact of Oracle's grid technology, its 10g database software launched six months ago. "Since we introduced grid, our database business is up 15%," Ellison said. He also said he plans to further satisfy the software development community's appetite for Linux by expanding Oracle's database footprint in that market, which he said would provide a competitive advantage over Microsoft's SQL technology, which doesn't run on Linux.

In the coming months, the company expects to continue its upswing. Henley said new software licenses are expected to grow 5% to 15% during the first quarter of fiscal 2005, and that revenue should grow as much as 9%. To accommodate that growth, he said the company would grow its database and application-development staffs by 12% and 10%, respectively. He also expects Oracle to close more deals valued at $500,000 or more, which accounted for 44% of revenue for the just-completed quarter.

Such revenue and staffing projections, Henley said, exclude the potential impact of any large acquisitions, and he indicated that Oracle execs are confident the company will emerge victorious in its legal struggle with the Justice Department over its efforts to acquire PeopleSoft.