Oracle Q4 Earnings Sweep the Boards

Oracle's total revenues for the year were up 26 percent; CEO Larry Ellison says database sales contributed to the company's growth during the quarter.

Oracle can thank much of its fourth-quarter 2005 success to increased sales across its entire product line, with database sales actually proving out a smaller increase than applications or middleware sales.

The applications business saw a recovery in the fourth quarter.

New license revenues were up nearly 52 percent for the quarter, to $350 million, versus $231 million for the same year-ago quarter—and $152 million for Oracle Corp.s third quarter in 2005.

Oracles database revenues were up 16 percent to $1.26 billion, while sales of its application server—renamed the Fusion middleware stack—grew 30 percent in the fourth quarter.

Oracles total revenues for the year were up 26 percent, to $3.88 billion, versus last years revenues of $2.41 billion.

Earnings per share grew 36 percent to $0.26, from $0.19 for the same period last year—$0.03 cents more than Oracles previous guidance.

Larry Ellison, Oracles CEO and founder, said the companys biggest business—database sales—contributed nicely to the companys growth during the quarter.

"We think people are moving from mainframe to Grid, the ability to use multiple computers to manage a single database," said Ellison, during Wednesdays earnings call with analysts. "Microsoft cant do that; IBM cant do that. You can use a group of low-cost PCs to replace the mainframe."

Also attributing to Oracles growth spurt in the quarter is the addition of several new applications businesses, including PeopleSoft Inc., which Oracle acquired last December after a bitter 18-month battle.

The company also added retail software maker Retek Inc. to its roster this spring—for which it outbid rival SAP AG—and data management provider Times Ten Inc.

The acquisition of PeopleSoft moved Oracle up a notch, to the second-largest software company in the world, behind SAP.

Oracles co-president Safra Catz said during Wednesdays call that the PeopleSoft integration is compete, with development and sales unified.

"There are no PeopleSoft salesmen and Oracle salesmen," said Catz, during Wednesdays call.

"As we predicted, PeopleSoft [customer] retention remains in the high 90 percentile."

Catz said that as of May 31, Oracle paid off the remainder of its $9 billion bridge loan to acquire PeopleSoft.

In terms of guidance for the coming quarter—and the next five years—Oracle expects total revenues to grow in the range of 32 percent to 34 percent to $2.9 billion.

It expects new software licenses to grow between 15 percent and 25 percent, total software revenues to grow between 31 percent and 34 percent, and total revenues to grow between 17 percent and 19 percent to between 11.3 billion and 11.5 billion.

For the five-year forecast, Oracle has said it is shooting for 20 percent earnings increase, year-over-year.

"Our earnings per share were up 36 percent [on a non-GAAP basis]. Thats well above the target of our earnings growth over the next five years to be someplace in excess of 20 percent," said Ellison.

"This first year of that plan and we did 36 percent, so thats a very good start."

Despite the overall glow from the conference call, Ellison did waver on the database question plaguing many users: Will Oracles next-generation application suite, Fusion, support multiple databases?

When questioned by analysts, Ellison said Fusion—which will bring together functionality (but not code) from Oracles E-Business Suite, PeopleSoft and J.D. Edwards suites—is based on openness.

"Our plan for Fusion is: Not only do we plan to support other databases, but we plan to support other Java application servers in our middleware," said Ellison.

/zimages/3/28571.gifClick here to read more about Oracle making its core Java development tool, Oracle JDeveloper 10g, available for free.

"So you should be able to use WebSphere Java server application server with our Business Intelligence, our integration technology or our portal server."

When pressed, Ellison explained that the Fusion middleware suite is based on openness; the application suite is still up in the air.

"There are a lot of tradeoffs on whether we support multiple databases," said Ellison. "For example, we could probably do a better job with security."

Ellison also said that because the new Fusion application suite, expected in 2008, will run on any application server, it will not contain Oracles traditional development tools, Oracle Forms or PeopleTools—a departure from early discussions around Fusion development.

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