Oracle beats estimates on strong Net software sales

The database software giant tops Wall Street projections as strong software sales to Internet businesses spark a big jump in fourth-quarter profits.

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Oracle topped Wall Street projections today as strong software sales to Internet businesses sparked a fourth-quarter profit.

The database giant posted an adjusted net income of $926 million, or 31 cents a share, for the fourth quarter, compared with $527 million, or 18 cents a share, during the same period a year ago. A consensus of analysts polled by First Call/Thomson Financial expected the business software maker to earn 25 cents per share.

Fourth-quarter revenue rose to $3.4 billion, up 15 percent from last year's $2.9 billion.

In after-hours trading today, Oracle's shares fell about $2.55 to $83.50.

Oracle executives said database software sales jumped 12 percent to $1.2 billion, while applications software sales soared 61 percent to $447 million. Sales from consulting, education and customer support increased 7 percent to $1.5 billion.

Oracle executives said applications sales were fueled by a 161 percent growth in customer relationship management (CRM) software sales. CRM software automates a company's sales, marketing and customer call-center operations.

Oracle chief executive Larry Ellison said Oracle became the world's largest applications software company this past quarter, surpassing rival SAP in software license revenue.

Oracle's applications run on top of its Internet-focused 8i database, which collects and stores corporate information.

"We're taking more market share from IBM and Microsoft in the database market," Ellison said in a conference call with analysts. "And in the enterprise application space, every single enterprise application vendor is suffering while we're experiencing record growth."

Ellison said Oracle's Business Online service is breaking even and has about 100 customers, including divisions within McDonald's and Federal Express. Business Online is a service that rents Oracle's software to businesses. The online service will become profitable next quarter, he added.

Analyst Brian Goodstadt of Standard and Poor's Equity Group said Oracle had a solid fourth quarter. The company's 15 percent revenue growth met his expectations, but he expects higher growth next year as more companies increase software purchases now that Year 2000 bug concerns are gone.

"Their bread and butter--database sales--only grew 12 percent, and that's not too exciting," he said. "But this year they laid the foundation for stronger growth next year. Companies are getting out of that (Year 2000) transition, and spending is picking up on new applications."

Ellison said Oracle's database sales didn't grow as high because the company this quarter decided not to give big discounts to customers to pump up its fourth-quarter financial figures. Ellison predicted that will result in higher demand for databases and an increase in sales next quarter.

"We think that's healthy and positive for our database business," Ellison said of the pricing strategy. "It bodes well for Q1, Q2, Q3 and subsequent quarters."

Goodstadt said Oracle has done a good job at cost cutting. The company last year slashed $1 billion in costs and is attempting to cut another $1 billion this year.

Oracle recently shipped Web versions of its enterprise resource planning (ERP) and CRM software. ERP software includes accounting, human resources and manufacturing applications.

New customers buying Oracle software this quarter included 3Com, BellSouth, Ford Motor, Odwalla and Panasonic.

For the fiscal year, the company earned a profit of $2.1 billion, or 69 cents a share, compared with $1.3 billion, or 43 cents a share, the previous year. Yearly sales reached $10.1 billion, up from last year's $8.8 billion.

Oracle's fourth-quarter operating margins improved from 27.4 percent to 41 percent.