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Oracle on Thursday blamed costs linked to its acquisition of PeopleSoft this year for a 2 per cent fall in net earnings in its latest quarter, to $798m, or 15 cents a share.

The US software maker was also held back by a slower rebound than Wall Street had expected in sales of its core database products, though it still managed to meet market expectations for pro-forma earnings once the PeopleSoft acquisition costs were excluded.

Larry Ellison, chief executive officer, said the pipeline of orders for the current quarter was stronger than it had been in the latest three months, though a rising dollar would continue to weigh on the results.

Oracle shares slid 4.6 per cent in early trading in New York to $12.24.

Sales of new licences for Oracle’s database and middleware products climbed 5 per cent in the quarter to $785m, an acceleration from the 1 per cent seen in the preceding three months, but still below the 8 per cent or so most analysts had expected. Oracle had blamed the weakness in its core business on price competition from Microsoft, which has launched a new version of its own database software.

A combination of slow economic growth and the effects of the rising dollar had hurt European earnings, Mr Ellison said. “Europe is in a bit of a funk,” he added. “It’s really hard to fight both of these headwinds.”

Overall, Oracle said currency movements had wiped 3 per cent from its latest reported earnings. But Mr Ellison said that, while currency movements were likely to hit European sales again this quarter, “the underlying business looks pretty strong”.

In applications software, Oracle’s latest reported results were lifted by the purchase of PeopleSoft, though its sales of new software licences were down from the combined sales of both companies a year ago.

In the latest period, Oracle said application licence sales had risen 24 per cent to $266m – a bigger increase then most analysts had expected – with part of the growth coming from a number of big contracts that had slipped from the end of the preceding quarter.

A year before, Oracle on its own generated sales of $215m, while PeopleSoft reported new licence sales of $185m for the three months to the end of December 2004 – a combined total of $400m, pointing to a fall of around a third in the combined business since then.

The percentage of former PeopleSoft customers renewing their support contracts had risen since the acquisition, according to Mr Ellison, who pointed to this as evidence that Oracle had kept its promise to maintain or improve customer service levels over the deal.

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