Oracle Tops Earnings Expectations

Oracle Corp. CEO Larry Ellison kept up the hype on the companys pursuit of PeopleSoft Inc. during the database behemoths fourth-quarter 2003 earnings report Thursday, saying that the only difference between Oracles offer and an earlier plan to merge the two companies is that Oracles plan wouldnt feature PeopleSoft President and CEO Craig Conway in charge.

“A year ago, Mr. Conway approached me with the idea of combining the Oracle applications business with the PeopleSoft applications business,” Ellison said during a live Webcast of the earnings report. “He identified himself as the right person to run that business.”

A little while later, Ellison said, Conway “suddenly” saw that the combined duo would present antitrust concerns, referring to PeopleSofts board of directors recently having cited antitrust concerns as a disincentive when recommending to shareholders that they reject the offer.

“Mr. Conway would be running the combined companies in his proposal,” Ellison said. “In ours he would not. Thats the only change.”

However, Ellison did refer to another change that the merger would bring: Oracles promise that customers of a merged Oracle/PeopleSoft would be allowed to migrate when and if they want, with no attached licensing fees and to whatever product they choose. “Were saying no choice is a bad thing,” Ellison said. “We think PeopleSoft customers deserve the right to choose. They can choose to stay on PeopleSoft 7, they can choose to upgrade to PeopleSoft 8 at no additional charge, or they can choose to migrate to Oracle eBusiness Suite, with no licensing fees required.”

Ellison also heaped scorn on PeopleSofts bid to merge with J.D. Edwards & Co., which PeopleSoft announced early last week, a few days before Oracle launched its hostile takeover. Ellison cited PeopleSofts most recent quarter, during which new applications sales fell 39 percent. Oracles own new-applications sales rose a smidgen, at less than 1 percent, during the same time frame. Meanwhile, J.D. Edwards lost money.

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“Things are getting worse, not better, at PeopleSoft,” Ellison said. “The managements plan is to take existing PeopleSoft business, which is under considerable stress, and merge with J.D. Edwards. We believe that J.D. Edwards is in worse shape than PeopleSoft. … Craig Conway said our offer is designed to disrupt PeopleSofts strong momentum in the market. Im not sure how you can describe going down 39 percent to $80 milllion as strong momentum.”

Besides continuing the ongoing catfight with Craig Conway, Oracle officials used the earnings report to report earnings. Despite the stormy seas surrounding its pursuit of PeopleSoft, Oracle managed to beat analysts estimates by $.02 per share, the company reported.

Fourth-quarter net income was $.16 per share, or $858 million—an increase of 31 percent over the year-ago figure of $656 million or $.12 per share net income for fourth quarter 2002. Year-ago results included an equity securities impairment charge of $104 million net of tax, or $.02 per share, related to Oracles investment in Liberate Technologies.

Total revenues in Q4 2003 increased 2 percent to $2.83 billion. New software license and other revenues rose 1 percent to $1.2 billion. Software license updates and product support increased 12 percent to $1.1 billion. Services declined 11 percent to $580 million.

Operating margin in the quarter reached a record high of 45 percent, beating the previous record of 44 percent in the fourth quarter of 2002.

For the full fiscal year 2003, net income increased 4 percent to $2.31 billion, or $.43 per share, compared with net income of $2.22 billion or $.39 per share a year ago. Total revenues declined 2 percent to $9.5 billion. The annual operating margin was 36 percent. Database sales were $933 million for the quarter.