Software company Oracle Corp reported quarterly profit jumped 38 percent on its purchase of PeopleSoft but forecast revenues at the low end of expectations, sending shares down 4.4 percent.
New sales of its mainstay database software rose 1 percent to $492 million from a year ago, which Oracle said was a strong period and hence a tough comparison.
Analyst Charlie Di Bona of Sanford Bernstein said he was concerned about the middling growth in database software, which is the company's core franchise.
"It was an unimpressive quarter," Di Bona said. "I'm always loathe to say, based on one quarter, the world is coming to an end, but this is something to keep your eye on."
Excluding items, Oracle said it had a per-share earnings of 14 cents its first fiscal quarter ended August 31, up 38 percent from the year-earlier period and matching analyst expectations as polled by Reuters Estimates.
Oracle said net income rose 2 percent to $519 million, or 10 cents per share, from $509 million, or 10 cents per share. Net revenue rose to $2.77 billion from $2.22 billion, missing Wall Street expectations were for revenues of $2.94 billion.
Oracle Chief Financial Officer Greg Maffei said on a conference call that he expects Oracle to earn 19 cents per share before items on revenue of $3.37 billion to $3.46 billion for the current second quarter. That compared with analysts estimates of 19 cents per share on revenue of $3.46 billion.
In his first earnings presentation since joining the Oracle in June, Maffei also backed the June forecast for fiscal 2006 earnings per share before items of 78 cents to 81 cents. Maffei, the former CFO of Oracle rival Microsoft Corp from 1997 to 2000, most recently was CEO of telecommunications services company 360networks.
New license revenue of its applications business programs rose 84 percent to $127 million in the first quarter, a market that Oracle is counting on to fuel faster profit growth and where it competes against German rival SAP AG, Microsoft and others. License revenue is closely watched by investors as it points to profit growth over time and leads to license renewals.
Di Bona said, however, that if Oracle had included the corresponding year-ago applications sales of PeopleSoft and Retek, another Oracle acquisition, its application license sales would have actually fallen. Oracle does not include those results in its historical financials, the analyst said.
Redwood Shores, California-based Oracle said on September 12 it would buy rival Siebel Systems Inc for nearly $6 billion to give it a stronger foothold in the rapidly growing niche of customer management software.
Since January, Oracle has closed seven acquisitions, including the $10.6 billion purchase of PeopleSoft Inc.
"We are optimistic about becoming number one in the middleware business," said Oracle Chief Executive Larry Ellison. Middleware is a type of software that helps programs communicate with one another and where Ellison said Oracle is gaining share against rival BEA Systems Inc.
Oracle now trades at about 17 times its estimated fiscal 2006 earnings per share before items, compared with about 18 times for its rival Microsoft.
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