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Licenses, support buoy Oracle revenue

Against the backdrop of its bid for rival PeopleSoft, the database giant says fourth-quarter earnings beat analysts' expectations. The full year was somewhat less rosy.

Oracle, conducting a hostile takeover bid for rival PeopleSoft, said that fourth-quarter earnings beat analysts' expectations and predicted growth for the current quarter.

The database company on Thursday reported revenue for the quarter, ended May 31, of $2.83 billion, up 2 percent from last year. Net profits reached $858 million, or 16 cents a share, compared with $656 million, or 12 cents a share, in the year-ago period.

Analysts had expected Oracle to report earnings of 14 cents a share, according to First Call.

During the quarter, new software license and other revenue rose 1 percent to $1.2 billion, while license upgrades and product support drove revenue up 12 percent to $1.1 billion. Oracle's services business, however, declined 11 percent to $580 million in the quarter, compared with the same time last year.

"In light of the continuing tight IT spending environment, we are particularly pleased that we executed well enough to deliver some top line growth in our business while improving both profits and margins," Jeff Henley, chief financial officer, said in a statement.

But for all of fiscal 2003, Oracle reported that revenue declined 2 percent to $9.5 billion from the preceding year. Net income reached $2.31 billion for the year, or 43 cents a share, up 4 percent from fiscal 2002.

Oracle had been expected to earn 42 cents for the year, according to analysts surveyed by First Call.

For the current first quarter, Oracle anticipates growth in its business.

"In all four regions of the world that we're in, our people are forecasting growth," Henley said. "We are seeing a bottoming out, and things are improving around the world. Some of the industries that have been the most depressed are starting to show improvement...We aren't necessarily seeing a rebound in telcos (telecommunications companies), but even the telcos are starting to be a little more optimistic."

Meanwhile, the Redwood Shores, Calif., company is amid a hostile bid for business applications software maker PeopleSoft. Last week, Oracle offered $5.1 billion in cash to acquire its rival.

Oracle, which leads the database market in terms of sales, has been worried about the waning of the double-digit growth it once counted

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PeopleSoft bid is a sign
of weakness for Oracle.

on in that market. As a result, it is anxiously seeking new ways to grow and has turned to business applications to bring in more revenue.

Oracle's applications business remained flat in the fourth quarter, with $246 million in revenue.

CEO Larry Ellison, however, noted during the conference call with analysts that the company's business applications sales have held their own while those of Oracle's competitors have declined.

"It was a great quarter for our applications business and a great quarter across-the-board," Ellison said. "Our win rate (in customers) is reflected in our financial results. In PeopleSoft's most recent quarter, they dropped nearly 40 percent in new application license sales--and we had a little bit of growth."

He added that Oracle had performed better, compared with rivals such as SAP, JD Edwards and others in the business applications arena.

Earlier Thursday, PeopleSoft's board of directors formally rejected Oracle's buyout offer, leaving Oracle to either sweeten its offer of $16 a share in cash or otherwise attempt to dislodge PeopleSoft's "poison pill" plan to block the takeover attempt.

Ellison addressed his company's current share offer and whether it would be raised.

"If you look at the alternative in front of PeopleSoft shareholders, a $16 all-cash offer from Oracle is a much safer way to go than following (PeopleSoft's) management team with their merger plans with JD Edwards," Ellison said. "So, when you assess that, the cash offer looks pretty good. Before we made the offer, PeopleSoft was trading for a little more than $15 a share."

Oracle plans to take steps such as filing its plans with federal antitrust regulators, Henley said.