Oracle, deep in the pre-integration process of acquiring Sun Microsystems in a $7.4 billion transaction, reported Sept. 16 that its fiscal first-quarter profit improved 4.4 percent thanks to higher margins, negating a second consecutive quarter of declining sales revenue.
The common stock price tumbled about 4 percent to $21.44 in after-hours trading, as new license revenue -- a key indicator of future software sales growth -- fell 14 percent.
Net income was $1.12 billion, or 22 cents a share, compared with $1.08 billion, or 21 cents, a year earlier. Including revenue from acquired companies, sales dropped 6.6 percent to $5.06 billion, Oracle Executive Vice President and CFO Jeff Epstein said in a conference call with analysts and journalists.
"Software license updates and product support revenues grew 11 percent, to $3.1 billion, for the quarter when adjusted for the change in the U.S. dollar since last year," Epstein said.
This growth, along with the company's "disciplined expense management, was key to our ability to generate a record $8.5 billion in free cash flow over the last 12 months," Epstein said.
Oracle's enterprise database business grew faster than its No. 1 competitor, Germany's SAP, in every region around the world -- including Europe, where Oracle grew 3 percent versus negative 39 percent for SAP's most recent quarter, said company President Charles Phillips.
"Our applications team also executed especially well in North America, where our applications business grew 8 percent versus negative 50 percent for SAP," Phillips said.
Founder and CEO Larry Ellison said his company has come a long way in its competition with IBM in the enterprise middleware space, and that it will continue to gain market share.
"It used to be for years that we were fifth, sixth, seventh in line behind IBM in middleware market share," Ellison said. "We're now the leader in that sector, and we expect to grow much faster, because we have a much better product than IBM. I expect us to continue to grow as enterprises move off mainframes and onto open systems.
"We're well-positioned to compete effectively against our biggest competitor, IBM."