Oracle Sales Tumble In 2QOracle Sales Tumble In 2Q

In what it described as its most difficult quarter in a decade, Oracle on Thursday reported an 11% drop in sales for its second quarter ended Nov. 30, including a 27% plunge in software-license revenue. Profits were also off for the quarter, although the 10 cents per share earnings were in line with Wall Street's expectations.

Oracle reported total sales of $2.36 billion for the quarter, down 11.4% from $2.66 billion in the same period a year ago. License revenue fell 26.7% to $819.3 million from $1.12 billion last year, while service revenue was essentially flat at $1.54 billion. Database license revenue was down 21% while application revenue was down a whopping 42%, CFO Jeff Henley told analysts in a conference call.

License revenue is expected to be down 15% to 19% year-over-year in the third quarter and flat in the spring. "Our current assumption is that we hit the bottom in 2Q," Henley said. Net income was $549.5 million, down 11.8% from $622.8 million last year. Earnings per share were down a penny to 10 cents; analysts had been projecting per-share earnings between 9 cents and 11 cents.

In the earnings announcement, CEO Larry Ellison called the company's second quarter "our toughest quarter in a decade." But in a conference call with analysts, Ellison noted that the company had a 35% operating margin in the quarter. That, combined with new releases of database and application server software, positions Oracle for strong sales and earnings growth once the economy improves, Ellison said. "I think we're going to manage the business assuming a slight and slow recovery. And if we're wrong about that, then our profits will just grow faster than they otherwise would have," Ellison said.