June 19, 2024

Oracle Earnings Surge as Sales Jump 12%

The financial results announced Tuesday highlighted Oracle’s overall health while a number of other big technology companies are slumping.

But they also add to concerns about Oracle’s push into hardware through its $7.4 billion acquisition of Sun Microsystems last year. Hardware sales fell 5 percent to $1 billion, the second consecutive quarterly decline.

Oracle executives emphatically defended the Sun acquisition Tuesday and described the decline as part of an effort to pare unprofitable sales. Lifting profit margins is far more important than increasing sales, they said.

Lawrence J. Ellison, Oracle’s chief executive, mentioned one kind of server, in particular, that he described as unprofitable, before telling analysts on a conference call that he did not care if its sales “went to zero.”

Oracle’s net income in the quarter, which ended Aug. 31, the first of its fiscal year, rose 36 percent, to $1.8 billion, or 36 cents a share, compared with $1.4 billion, or 27 cents, in the same quarter a year ago. Revenue climbed to $8.4 billion, from $7.5 billion.

The adjusted income of 48 cents a share and the revenue were slightly above the expectations of Wall Street analysts. They had expected 47 cents a share and revenue of $8.36 billion, according to a survey of analysts by Thomson Reuters.

Oracle, based in Redwood City, Calif., has weathered the economic turbulence of the last few years far better than a number of other big technology companies that primarily sell to other corporations. While Cisco Systems and Hewlett-Packard retool, for instance, Oracle has been able to expand sales.

Recent upheaval in Europe, however, has raised doubts about Oracle on Wall Street. Nearly 30 percent of its revenue is from Europe, which is reeling from fears of Greece defaulting on its international debt as well as from worries about bank failures.

Addressing analysts’ questions, Safra A. Catz, a co-president at Oracle, said that sales remained robust in Europe, including among customers considered the most vulnerable in a downturn like financial services firms and the public sector. In a thinly veiled dig at rivals, she said that “Oracle has a lot of company-specific momentum.”

She added, “We were strong in all the sectors that you may be reading about struggling, both in Europe and the United States.”

Given the tough economy, Oracle’s report was encouraging, said Brendan Barnicle, an analyst with Pacific Crest Securities. New software license revenue in the region that includes Europe, he pointed out, grew a respectable 15 percent, more than any of the previous four quarters and more than the Americas or Asia. “Every area people were worried about, they contradicted the trends,” Mr. Barnicle said.

Oracle’s primary business of selling and maintaining corporate database software showed strength. New software license revenue, a critical measure of the company’s business because it brings recurring revenue, grew 17 percent, to $1.5 billion.

In hardware, Oracle is pushing a strategy to servers loaded with database software. The servers, called Exadata, compete against H.P. and I.B.M. The company has said that it has more than 1,000 customers for Exadata. In the quarter, it said that it added at least 100 more.

In its financial forecast, Oracle said it expected adjusted revenue in the second quarter to rise 4 percent to 8 percent compared with the same quarter a year earlier, or slightly lower than what analysts had forecast. Shares of Oracle rose 3.4 percent in after-hours trading Tuesday to $29.04. In regular trading, they declined 2.3 percent to $28.35.

This article has been revised to reflect the following correction:

Correction: September 20, 2011

An earlier version of this article misstated the day of Oracle’s earnings report. It was Tuesday, not Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=9e51745c63f5420a73061ae5f7c92e04

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