Or­a­cle’s profit tops an­a­lysts’ es­ti­mates on ris­ing de­mand for data­bases

The Pak Banker - - Company& -

SAN FRAN­CISCO: Or­a­cle Corp., the sec­ond-largest soft­ware maker, rose in Nas­daq trad­ing af­ter fore­cast­ing profit for this quar­ter that may top an­a­lysts' pre­dic­tions, a sign it's ben­e­fit­ing from an ac­qui­si­tion­fu­eled ex­pan­sion into hard­ware.

Profit ex­clud­ing cer­tain ex­penses will be 48 cents to 50 cents a share, Or­a­cle Co­Pres­i­dent Safra Catz said yes­ter­day on a con­fer­ence call. That ex­ceeds the 47-cent av­er­age of es­ti­mates com­piled by Bloomberg. The fore­cast fol­lowed a re­port show­ing profit rose to 51 cents in the pe­riod ended Nov. 30, higher than an­a­lysts' av­er­age pre­dic­tion of 46 cents.

Chief Ex­ec­u­tive Of­fi­cer Larry El­li­son has bulked up in hard­ware to make Or­a­cle a on­estop busi­ness com­put­ing shop, and he's mak­ing head­way on a pro­jec­tion that this year's pur­chase of Sun Mi­crosys­tems Inc. will boost fis­cal 2011 op­er­at­ing profit by $1.5 bil­lion. That's al­layed con­cern he over­reached by buy­ing more than 65 com­pa­nies since 2005, said Ja­son May­nard, an an­a­lyst at Wells Fargo Se­cu­ri­ties in Santa Mon­ica, Cal­i­for­nia.

"Years ago, peo­ple didn't be­lieve in the strat­egy," said May­nard, who rates Or­a­cle "out­per­form." "There were a lot of doubters on the Street. Peo­ple have flipped."

Or­a­cle, based in Red­wood City, Cal­i­for­nia, gained $1.19, or 3.9 per­cent, to $31.46 in Nas­daq Stock Mar­ket trad­ing. The shares have climbed 28 per­cent this year.

For the third quar­ter, which ends in Fe­bru­ary, Or­a­cle fore­cast rev­enue growth of 31 per­cent to 35 per­cent, as­sum­ing cur­rent ex­change rates, ahead of an­a­lysts' av­er­age pre­dic­tion that sales would rise 30 per­cent to $8.4 bil­lion.

New li­cense sales, a pre­dic­tor of rev­enue, will rise 10 per­cent to 20 per­cent, Or­a­cle said. That in­di­cates an in­crease to as high as $2.1 bil­lion. May­nard had pre­dicted an 11 per­cent gain, to $1.9 bil­lion. Last quar­ter, new li­cense sales grew 21 per­cent to $2 bil­lion. May­nard es­ti­mated $1.85 bil­lion.

"The strength in the quar­ter was very broad-based," Co­Pres­i­dent Catz said on the con­fer­ence call.

The com­pany re­ports sales that in­clude de­ferred rev­enue from acquired com­pa­nies and don't con­form to gen­er­ally ac­cepted ac­count­ing prin­ci­ples. On that ba­sis, sales in­creased to $8.65 bil­lion in the sec­ond quar­ter, com­pared with $8.34 bil­lion, the av­er­age pro­jec­tion in a Bloomberg sur­vey of an­a­lysts.

In the com­ing months, Or­a­cle will re­lease new ver­sions of its busi­ness ap­pli­ca­tions de­vel­oped un­der a project known as Fu­sion.

El­li­son said the new soft­ware, which com­pa­nies can run in their data cen­ters or ac­cess via the Web, would strengthen Or­a­cle's po­si­tion against SAP AG, Sales­force.com Inc. and closely held Work­day Inc.

"You're just see­ing the be­gin­ning of our share gains in ap­pli­ca­tions," El­li­son said on the con­fer­ence call.

Fur­ther in­creases in Or­a­cle's stock will hinge on whether the com­pany can keep draw­ing cus­tomers to its ap­pli­ca­tions, the pro­grams that help busi­nesses han­dle such tasks as pay­roll and track­ing sales leads, said Wal­ter Pritchard, an an­a­lyst at Cit­i­group Inc. in San Fran­cisco. Sales of new ap­pli­ca­tions li­censes rose 21 per­cent to $579 mil­lion last quar­ter.

"The biggest swing fac­tor on shares is sus­tain­abil­ity of strong sec­ond-quar­ter apps per­for­mance," he said in an e-mail. Pritchard rec­om­mends buy­ing Or­a­cle shares and doesn't own them. Or­a­cle, which ranks sec­ond to Mi­crosoft Corp. in soft­ware sales, also said it will is­sue a div­i­dend of 5 cents a share. The div­i­dend will be payable on Feb. 9 to hold­ers of shares as of Jan. 19.

Un­der El­li­son, Or­a­cle has spent more than $42 bil­lion on ac­qui­si­tions since the be­gin­ning of 2005. The stock has more than dou­bled in the past five years, com­pared with an 18 per­cent gain for the S&P technology in­dex.

The buy­ing spree has brought Or­a­cle into closer com­pe­ti­tion with SAP, Hewlet­tPackard Co. and In­ter­na­tional Busi­ness Ma­chines Corp. HP, the world's largest com­puter maker, fore­cast first-quar­ter profit last month that ex­ceeded an­a­lysts' es­ti­mates. -Bloomberg

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