Acquisitions hurt Oracle's bottom-line
16-12-2005
by Ciara O'Brien

Software giant Oracle upped its revenue by 19 percent in its fiscal second quarter results, but saw its earnings per share slump by 2 percent.

The second quarter of the firm's fiscal year 2006 saw net income fall to USD798 million, translating into USD0.15 a share, compared with USD815 million, or USD0.16 per share, in the same period in 2004.

Despite revenue surging to USD3.29 billion, this still failed to satisfy Thomson First Call analysts, who had been expecting higher revenue figures, in the region of USD3.4 billion.

Rising costs created by Oracle's acquisition activity hit quarterly profits, causing shares in the firm to fall. Oracle has made a number of acquisitions in recent years, adding companies such as PeopleSoft and customer relationship management software specialist Siebel Systems to its stable. PeopleSoft was purchased for USD10.6 billion in December 2004, resulting in 5,000 redundancies.

"Since our acquisition, customers running PeopleSoft products have registered substantially improved satisfaction levels," said Oracle CEO, Larry Ellison. "As a result those customers are now renewing their support contracts at a higher rate than when PeopleSoft was a stand-alone company. Nobody predicted that. They're happy, we're happy."

Other areas of the business performed well; total software revenues in the second quarter grew by 18 percent year on year, reaching USD2.6 billion. Meanwhile, database and middleware new licence revenues increased by 5 percent to USD785 million, while applications new licence revenues were up 24 percent, hitting USD266 million. Services revenues performed similarly well, achieving increases of 26 percent to reach USD675 million.

Hopes were pinned on the database segment, which is Oracle's core business, to show some significant growth this quarter. In the last quarter, sluggish growth in Oracle's core database business impacted on its income growth, hampering strong sales of applications software, leading to disappointing results for the firm.

Oracle currently employs about 950 people in Dublin and is currently establishing a new EUR1.6 million operation in Belfast, to support its UK and Republic of Ireland customers.