Oracle misses Wall Street Q3 forecast

27-03-2008

by Charlie Taylor

Enterprise software provider Oracle has reported third quarter profits of USD1.3 billion, but upset analysts by missing market forecasts.

For the firm's third fiscal quarter, ended 29 February, revenue jumped 21 percent to USD5.35 billion. However, analysts had been predicting sales of around USD5.42 billion.

Net income rose 30 percent to USD1.3 billion, or USD0.26 per share, up from USD1 billion, or USD0.20 per share for the same three-month period a year ago. Analysts though had been expecting per share earnings of USD0.30.

Oracle shares fell by 8.6 percent, or USD1.81, to USD19.13 on Wall Street in after-hours trading following publication of its third-quarter results.

Despite missing estimates Oracle was happy with its quarterly performance. "Oracle delivered another quarter of strong financial results and earnings growth. In Q3, we once again exceeded our non-GAAP EPS growth target of 20 percent," said Oracle president and CFO, Safra Catz. "For the first three quarters of this year we have grown our operating cash flow 55 percent, three times faster than at this point in the past five years," she added.

The firm, which is currently ranked third behind Microsoft and IBM in terms of total software sales, saw software revenues rise 21 percent to USD4.2 billion.

Oracle reported a 16 percent rise in new software sales to USD1.6 billion, which is at the low end of analysts expectations.

Database and middleware new license revenues were up 20 percent and applications new license revenues were up 7 percent. GAAP software license updates and product support revenues were up 25 percent to USD2.6 billion while service revenues were up 21 percent to USD1.1 billion, compared to the same quarter last year.

"Software license updates and product support revenues were up 23 percent on a non-GAAP basis to USD2.6 billion. By next quarter we expect to pass USD10 billion for the year," said Oracle CEO, Larry Ellison.

"Our non-GAAP operating income grew to USD2.2 billion with our margins increasing nearly 200 basis points to 41 percent up from 39 percent in Q3 of last year. Our operating margins are now substantially higher than our competitors, including Microsoft, reflecting the unique leverage in our business," he added.

For the fourth quarter, Oracle is forecasting sales growth of between 14 percent to 18 percent, which is equivalent to sales of between USD6.71 billion to USD6.94 billion.