Oracle (Nasdaq: ORCL) easily hurded the consensus earnings estimate in the first quarter and set a stock split.
After market close Thursday, the world's second largest independent software vendor reported fiscal first quarter net income of $501 million, or 17 cents per share. First Call's survey of 28 analysts predicted a profit of 13 cents per share for the quarter ended Aug. 31.
Also Thursday, Oracle announced a 2-for-1 stock split, to take effect after market close Oct. 12 for shareholders of Sept. 25 record. It will be the tenth stock split for Oracle since the company went public in March 1986. Oracle currently has more than 2.8 billion shares outstanding.
Shares of Oracle traded above 82 in relatively strong afterhours activity on the Island electronic communications network, immediately following the earnings report. Oracle stock rose 3.125 to 84.9375 in Thursday's regular trading ahead of the earnings report, and volume was strong on call options.
First quarter revenue rose 14 percent year-over-year to $2.3 billion, but net income growth outpaced largely because of margin improvements. First quarter operating margins increased to 29.1 percent, from 17.4 percent in the comparable period a year earlier.
CEO Larry Ellison more than a year ago set a goal of cutting annual costs by $1 billion.
Applications sales of $156 million represented a 42 percent growth from the year-ago period. Revenue from Oracle's core database business increased 32 percent to $585 million. Services revenue rose 8 percent to $1.5 billion.
"We are off to our fastest start in six years," Ellison said. "The spectacular growth in our database business demonstrates that we are continuing to take market share from IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT). ... Sales of our new applications software -- the Oracle e-Business suite -- will just get stronger and stronger throughout the year."
Oracle's productivity gains should translate into faster revenue growth in fiscal 2001, CFO Jeff Henley said.
Wall Street expected a strong report from Oracle. Morgan Stanley Dean Witter on Thursday morning upgraded Oracle to a "strong buy" from an "outperform" rating.
"The feeling is that it is going to be a good, positive number," said Alan Ackerman, senior vice president and market strategist at Fahnestock & Co.
Analysts are especially encouraged by Oracle's increased efficiency. "They've been showing significant improvement in operating profitability," Wit Soundview analyst Jim Mendelson told ZDII this week. "I'm optimistic that they had a very strong quarter, and certainly all input I've got would support that.">