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Oracle shatters 4Q estimates, 1Q pipeline &#039stunning&#039

Oracle shattered analysts' estimates in its fourth quarter Tuesday, posting a profit of $926 million, or 31 cents a share, on sales of $3.4 billion. Officials were also bullish on the first quarter outlook.

A survey of analysts by First Call Corp. expected the database software developer (Nasdaq: ORCL) to earn 25 cents a share in the quarter. And officials said the good times can last. On a conference call with analysts, Chief Financial Officer Jeff Henley called the first quarter deal pipeline "stunning."

"The first quarter pipeline is stunning, awesome," he said. "I don't know how to describe it. We've had healthy pipeline growth, but this is stunning."

The $3.4 billion in sales topped most analysts' estimates and marked a 17 percent improvement from the year-ago quarter when it earned $498 million, or 17 cents a share, on sales of $2.9 billion. Wit SoundView analyst Jim Mendelson predicted sales of $3.39 billion.

Including gains made from a variety of investments, Oracle earned $4.9 billion, or $1.63 a share, in the quarter. The investment gains primarily came from the sale of 12 percent of Oracle's holdings in Oracle Japan, of which Oracle owns 74 percent. This equity reduction was necessary for Oracle Japan to comply with the listing requirements of the Tokyo Stock Exchange (TSE1).

Oracle's cost-cutting measures resulted in operating margins of 41.1 percent in the quarter, up from 27.4 percent in the year-ago quarter. Oracle ended the quarter with $8 billion in cash.

"A billion dollars in annual savings translates to a 10 point improvement in our margins," said Henley. "As we enter the second year of our e-business transformation, we are beginning to benefit from the sales and marketing productivity gains that will accelerate revenue growth in fiscal 2001."

In the quarter, applications software sales jumped 61 percent to $447 million, with CRM sales surging 161 percent. Database software sales rose a modest 12 percent to $1.2 billion while consulting and support sales inched up 7 percent to $1.5 billion.

Ahead of the earnings report, Robert Tholemeier, an analyst at First Security Van Kasper, said he expected Oracle to earn 25 cents a share on sales of $3.367 billion.

"I'm expecting their operating margins to go way up this quarter, Tholemeier said. "I think most (analysts) operating margin estimates are too low."

Tholemeier said he expects Oracle's presence in the Internet infrastructure market to rapidly expand in the quarters and years ahead.

"People tend to forget about Oracle's capacity to develop applications," he said. "They're huge and they're focused. Oracle's becoming a stock that portfolio managers can't afford to not have as a core holding."

Last quarter, Oracle beat the Street estimate when it earned $498 million, or 17 cents a share, on sales of $2.4 billion.

Its shares moved as high as 90 in March after falling to a 52-week low of 16 1/2 last June. It also split 2-for-1 in January.

Twenty-five of the 28 analysts covering the stock rate it either a "buy" or "strong buy."

Ahead of the earnings report, Oracle shares closed unchanged at 86. However, the stock fell 3 15/16 to 82 1/16 in after-hours trading.