Oracle Income Grows on Database Software Sales

The company attributes a 16 percent rise in net income to demand for Oracle Database 10g, but revenue from its applications business has dropped by 36 percent from the year-ago quarter.

Oracle on Tuesday announced a 16 percent increase in its first-quarter net income, attributing the gain to demand for its database software, Oracle Database 10g.

Total revenue for the quarter, ended Aug. 31, rose to $2.22 billion, a 7 percent increase over last years first-quarter revenue of $2.07 billion.

But any gains cannot be attributed to Oracles faltering applications business.

Oracle Corp. reported $69 million in application revenues, a 36 percent decline from the year-ago quarter. New software license revenue declined by 10 percent compared with the year-ago quarter—a key barometer for future maintenance revenues.

"We are not pleased with our application revenue decline, but we do anticipate positive growth [for the year]," said Harry You, Oracles new chief financial officer. "We are making changes in sales [to accomplish that]."

Oracle is also on the hunt for other applications businesses. The company launched a $7.7 billion hostile bid for rival business applications maker PeopleSoft Inc. last year to flesh out its applications division—a move that met with some resistance. Last week, the Redwood Shores, Calif.-based company won the right to pursue the deal, beating a suit brought by the U.S. Department of Justice to block it.

The ruling could be appealed by the Justice Department, and Oracle is awaiting a similar decision from the European Commission.

/zimages/2/28571.gifShould PeopleSoft wave the white flag? Click here for a column.

Despite its bombastic approach to the PeopleSoft deal in the past, Oracles You promised prudence in the coming months.

"We are clearly gratified by Judge Walkers ruling last week," You said. "We have reached out to PeopleSofts board, and we are hopeful these contacts will be fruitful. We will also be sensitive to ensuring that the transaction does not impair [our bottom line]."

In the meantime, Oracle president Chuck Phillips said the company is making changes in its sales force to better handle the issues in the applications division. The company also expects that the 11i.10 release of its business applications suite, expected next month, will increase sales.

But clearly, Oracle is banking on its database software for any real growth.

"We have grid, and they dont," Phillips said.

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