Oracle's acquisition of rival PeopleSoft and strong demand for business and database software helped the world's second-largest software maker report better than expected fourth-quarter net profits and revenues.
The California-based software group said results were driven by strong sales of its flagship database products and better than expected sales of enterprise applications software, including PeopleSoft products.
The results, coupled with bullish comments about the outlook, helped Oracle's shares close up 74 cents almost 6 per cent to $13.57 in New York on Wednesday.
“We are very optimistic about [the outlook],” said Safra Catz, co-president, who noted the US market was particularly strong.
Net income for the three months ended May 31, the first full quarter since Oracle completed the $10.6bn (€8.8bn) PeopleSoft deal in January, increased by 3.2 per cent to $1.02bn, or 20 cents a share. Excluding one-off items, Oracle reported earnings of 26 cents per share. Revenue for the quarter increased by 26 per cent to $3.88bn from $3.08bn a year ago.
New licence sales for Oracle's core database and middleware products a closely watched indicator of future earnings potential increased by 16 per cent to $1.26bn, while new licence revenues for enterprise applications increased by 52 per cent to $350m. Service revenues climbed 35 per cent to $755m.
Larry Ellison, Oracle's chief executive, has spent $11.2bn on four purchases this year, mostly designed to boost the company's position in the enterprise applications market. The results on Wednesday were seen by analysts as evidence that the strategy is paying off.
After buying PeopleSoft, Oracle made several other smaller acquisitions, including spending $670m in April on Retek, a retail software maker. Mr Ellison said Oracle would continue to look for acquisitions, but only if companies contributed to higher operating margins.
In the meantime, Ms Catz said the integration of PeopleSoft was going smoothly. “The rapid integration of PeopleSoft into our business contributed to the strong growth in both applications sales and profits that we saw in the quarter,” she said.
The PeopleSoft deal vaulted Oracle to second place in the $23.6bn enterprise applications market behind Germany's SAP, which has about 43 per cent of the global market.
Oracle's core database business, which accounts for the bulk of its revenues and profits, also performed well. Mr Ellison claimed Oracle was closing the gap with IBM, the market leader. Oracle said it expected full-year 2006 earnings of 78-81 cents a share on revenue of $14.2bn-$14.4bn, slightly higher than analysts had been forecasting.