Oracle surges on strong earnings report
Shares of Oracle surge after the company plows past Wall Street estimates and reports strong database software sales fueling a solid third-quarter profit.
Shortly after the opening bell, Oracle shares jumped $3.69, or nearly 5 percent, to $80.69, on heavy volume of 12.7 million shares. The company also got an early boost from investment firms, which raised their price targets and earning forecasts following yesterday's strong earnings report.
Analysts at Donaldson, Lufkin & Jenrette raised fiscal 2000 earnings estimates to 71 cents per share from 56 cents as well as fiscal 2001 earnings forecasts to 80 cents per share from 66 cents. Analysts at Warburg Dillon Read upped their price target on Oracle to $100 from $85. In pre-market trading earlier this morning, Oracle's stock touched $85, setting a new 52-week high.
Oracle posted adjusted net income of $498 million, or 17 cents per share, for the third quarter, an 80 percent jump over adjusted net income of $277 million, or 9 cents per share, split-adjusted, for the same period last year. A consensus of analysts polled by First Call expected the software maker to earn 13 cents per share. The figures track profit earned from sales of products and services.
Including gains from investments, Oracle reported net income of 25 cents a share, or $763 million. For the same time period last year, net income came to $293 million, or 10 cents per share.
Third-quarter revenue jumped 18 percent to $2.45 billion from $2.1 billion last year.
Oracle executives said database sales increased 32 percent to $778 million, while application software revenue jumped 35 percent to $199 million. Revenue from consulting, education and support services grew 10 percent to $1.4 billion.
During a conference call with financial analysts, Oracle chief executive Larry Ellison said the company has already beat its goal of saving $1 billion this fiscal year by moving many of the company's operations, such as product sales, to the Internet.
The database software maker has expanded its reach into the growing realm of business-to-business e-commerce. Recently, Oracle inked deals with General Motors, Ford Motor and DaimlerChrysler to create an online exchange so suppliers in the industry can cut procurement costs. In the retail industry, Oracle formed an alliance with Sears and Carrefour, two of the world's largest merchants, to match up retailers and suppliers.
Hambrecht & Quist analyst Jim Pickrel said Oracle had a great quarter, and he expects strong sales in e-commerce software to fuel future growth.
"It's astonishing how they controlled costs faster than expected and laid the groundwork for substantial new markets," Pickrel said. "They're getting these online exchange deals and have a huge opportunity there."
Pickrel said Oracle has not received revenue from the online exchange deals, but he expects sales from them to kick in as Oracle builds e-commerce systems using their software.
Ellison said he expects the company to grab a greater chunk of the e-commerce software market.
"Everything runs on the Internet. We have a complete suite," Ellison said. "Never has one company become dominant in a fragmented applications market. Think of this as Microsoft Office--one company with all the pieces that fit together."
This spring, Oracle plans to release Web versions of its Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) software. ERP software typically includes accounting, human resources and manufacturing applications, while CRM software automates a company's sales, marketing and other customer needs.
Ellison said the company's third-quarter sales of CRM software reached $49 million, up 179 percent from a year ago. He predicted sales will double next quarter. Ellison also expects revenue from Oracle's Business Online, which rents software over the Web, to skyrocket.
The company's total earnings this quarter were boosted by a $432 million gain from the sale of investments in other companies, an increasingly common profit center for technology giants.
The bulk of the gain stems from Oracle's recent sale of stock from Liberate Technologies, a network computer software developer spun off from Oracle. Oracle sold 11 percent of its holdings of Liberate.