Flying in the face of a weak economy and a nearly dead dot-com sector, Oracle Corp. posted respectable financial results for the quarter that ended Aug. 31.
But the database and enterprise applications developer faces challenges internally and externally if it is to keep up its rate of development and innovation.
Oracle, of Redwood Shores, Calif., reported net income of $511 million on revenue of $2.24 billion in the first quarter of its 2002 fiscal year, compared with net income of $501 million on revenues of $2.26 billion in the same quarter of the prior fiscal year. Earnings per share increased a penny from fiscal 2001, to 9 cents, beating analysts expectations by 1 cent.
Operating margins increased to 33 percent this year from 29 percent last year. And while new-license revenue was down nearly 8 percent this quarter, compared with the first quarter of fiscal 2001, it was offset by an increase of $54 million in service revenues.
Oracle reported that its database sales were down 9 percent from the same quarter last year and that applications sales grew only 3 percent. While predicting performance for the next quarters is difficult given the tumult caused by the terrorist attacks on the United States, Oracle executives are suggesting the companys financial situation could get worse.
"We have pretty good data about what people are forecasting and what leads were getting," said CEO Larry Ellison in a conference call with the press and analysts last week. "And we dont think things are recovering."
Chief Financial Officer Jeff Henley said there could be "15 percent negative earnings," or they could be flat.
Oracle must confront a handful of challenges in the coming months, according to industry experts. Its market- leading database is under pressure from IBM and Microsoft Corp., and adoptions of its Oracle11i e-business applications and its application server are not growing particularly fast.
"They face a very difficult global economy, and it even gets more difficult as it gets harder to fly—and there very literally could be war," said Eric Upin, an analyst with Robertson Stephens Inc., in San Francisco. "There are also software- specific problems, and adoption has slowed."