Last updated: March 25, 2010 11:57 pm

Oracle boosted by new licence sales

Oracle said on Thursday it had seen a rebound in a key measure of new software licence sales, reinforcing Wall Street’s hopes that a broader rebound in the technology sector had picked up steam in the early months of this year.

At the same time, Larry Ellison, chief executive of the US software company, stepped up his war of words with German rival SAP, which recently replaced its own CEO. “We think SAP is vulnerable,” Mr Ellison said, adding that he believed Oracle now had a chance to overtake SAP in business applications software.

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SAP countered by casting doubt on a long-delayed upgrade of Oracle’s business application software, known as Project Fusion, which Oracle says is due finally to hit the market this year. “Fusion, if it ever comes to market, will force customers to do massive upgrades, which is as Oracle points out a completely different strategy than SAP’s,” the German company said.

Oracle’s latest quarterly numbers were broadly in line with Wall Street’s official earnings expectations but failed to meet more optimistic, unofficial hopes. The optimism had driven the company’s stock price to a nine-year high earlier in the day, and the shares fell back slightly in after-market trading.

Overall earnings fell from a year before as losses from Sun Microsystems, which Oracle acquired in January, dented its performance. Its net income dropped 10 per cent to $1.2bn, or 23 cents per share, while revenues rose 17 per cent to $6.4bn. Excluding the effects of currency swings, revenues rose 12 per cent.

Underpinning the company’s latest numbers were new licence sales of $1.7bn, a rise of 5 per cent excluding the effects of currency swings and the Sun acquisition. That was the strongest growth it had seen in seven quarters. While most of Oracle’s revenues come from annual maintenance fees paid by existing users, licence sales are an indicator of new demand from customers that cut back on technology spending during the recession.

Sales of new application software licences, a business in which SAP is the leader, increased by 21 per cent to $477m.

Compared with the decline reported recently by SAP, the figures showed that Oracle was continuing to eat into the German company’s market share, Mr Ellison said.

Oracle’s latest figures, for the third quarter of its fiscal year ending in February, included one month of Sun’s figures. At $596m, Oracle executives claimed that Sun’s hardware sales had performed better than expected.

They reiterated earlier forecasts about a turnround in the struggling business’s performance.

Excluding goodwill amortisation, stock-based compensation expenses and the Sun losses – the basis on which Wall Street assesses the company’s performance – Oracle reported earnings of 38 cents a share. That was broadly in line with consensus expectations, and was up from 35 cents a year before.

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