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Oracle's software growth disappoints

Despite positive quarterly financial results, the vendor admitted closing some deals dented its software growth forecast, sending its share price into decline.

By Miya Knights, 27 Mar 2008 at 11:45

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Oracle yesterday posted disappointing quarterly software sales, citing delayed customer activity due to global economic instability and causing its share price to drop by eight per cent.

Although the company's fiscal 2008 third quarter (Q3) earnings per share were up 30 per cent to $0.26 compared to the same quarter last year, sales of new software rose only 16 per cent - just making the lower end of its December forecast of 12 to 25 per cent growth.

Safra Catz, Oracle's chief financial officer, said the company was having a tougher time closing these deals than it did a year ago. "Customers were little more cautious toward the end of the quarter," she said during an analyst conference call discussing the results.

Q3 total revenues were up 21 per cent to $5.3 billion (£2.6 billion), while quarterly operating income was up 35 per cent to $1.9 billion and net income was up 30 per cent to $1.3 billion (£648 million), according to general accounting principles.

Software revenues enjoyed 21 per cent growth to $4.2 billion (£2.1 billion) with new software licence revenues up 16 per cent to $1.6 billion (£798 billion). Database and middleware new licence revenues grew by 20 per cent and new applications licence revenues were up seven per cent. Service revenues grew by 21 per cent to $1.1 billion (£549 million), compared to the same quarter last year, while net income was up 22 per cent to $1.6 billion.

Overall, Catz was upbeat about conditions, saying: "For the first three quarters of this year we have grown our operating cash flow 55 per cent, three times faster than at this point in the past five years."

The company's chief executive, Larry Ellison, said the results put the vendor on target to pass the $10-billion mark for the year. "Our operating margins are now substantially higher than our competitors, including Microsoft, reflecting the unique leverage in our business," he said.

Shares of Oracle fell about $1.81 to $19.13 (£9.54) in US after-hours trading.

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