Oracle Earnings Soar as It Adds PeopleSoft, Retek Assets

Oracle's revenue soars by 23 percent and its net income by 25 percent in its fiscal third quarter, helped by the first two months of income from its buyout of PeopleSoft.

Counting the first two months of income generating from its newly acquired PeopleSoft assets, Oracle on Tuesday reported that third-quarter revenue and earnings soared as it reported hefty increases in sales of its core database technology.

Based on these results, Oracle Corp. officials raised their estimate for fiscal year 2005 earning per share from 62 cents per share to a maximum of 65 cents per share. These results are not based on GAAP (Generally Accepted Accounting Practices) that fully account for the cost of stock options and related expenses.

Revenue for the quarter increased by 23 percent to $3.09 billion, while net income totaled $814 million, a 25 percent increase over the same quarter a year ago, according to Oracle co-president Safra Catz.

Oracle officials made it clear that compared with Oracles sales and revenue, its $656 million merger deal with retail software producer Retek Inc., reached Monday night, was small potatoes.

"It is important to know that while Retek is an important strategic asset for Oracle—especially for our retail strategy—it is dwarfed by the size of our company," Oracle co-president Charles Phillips said. The acquisition will be accretive to Oracles cash flow "but is so small it doesnt have a material impact on our earnings in the future," Phillips said.

Oracles tender offer for Retek is scheduled to expire April 5, and it expects to take control of the company the next day, assuming that it acquires a majority of the shares, Phillips said.

Oracle already has an integration team in place that is "moving forward with the work to ensure a smooth transition with customers, employees and partners," Phillips said.

Retek customers likely will fare far better under Oracle ownership than they would have if SAP AG had succeeded with its final offer of $11 per share, said Paula Rosenblum, director of retail research at Boston-based Aberdeen Group Inc.

Retail industry customers would have faced too much uncertainty about the upgrade path under an SAP regime because most Retek customers ran the retail applications on the Oracle database or with Oracle applications, Rosenblum said.

There was already a great deal of overlap between SAPs existing retail applications and Retek applications, offering the likelihood that Reteks 200 corporate customers would have faced a "rip and replace" upgrade cycle to a unified SAP application suite, she said.

Next Page: Ellison says SAPs offer for Retek forced Oracles hand.

John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s eWEEK.com since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...