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Oracle Profit Tops Forecasts as Acquisitions Boost Sales

Business software maker

Oracle's headquarters in California.
AP
Oracle's headquarters in California.

Oracle posted a higher quarterly net profit on Tuesday as as new software license sales rose, sending Oracle shares higher in late trading.

Oracle shares rose more than 4% to $18.28 in extended trade.

The results from the world's biggest database software maker mark a contrast to German rival SAP, which said in January it missed a key 2006
sales target, fueling concerns that big companies might be holding back on technology spending.

"I was impressed to see the revenue came in nicely higher than the Street had expected," said Kim Caughey, who helps manage some $1 billion of assets at Fort Pitt Capital Group. "These guys are on the first line of companies determining whether to spend more on infrastructure. It is good to see that they are, at least in this quarter."

Oracle's fiscal third-quarter net profit rose to $1.03 billion, or 20 cents per share, from $765 million, or 14 cents per share, a year ago. Excluding items, Oracle had a per-share profit of 25 cents.

Revenue rose to $4.4 billion from $3.47 billion as Oracle sold more software that helps companies manage everything from accounting to human resources to inventory management.

Analysts, on average, were forecasting a per-share profit before items of 22 cents on revenue of $4.33 billion, according to Reuters Estimates.

In December, Oracle had posted a healthy rise in profit but disappointed Wall Street with weaker-than-expected sales of new software application licenses. This led to some investor fears that its acquisition strategy may have hit a bump in the road.

Chief Executive Larry Ellison chalked up that performance to an inability to close deals rather than a broad slowdown in technology spending and a stuttering economy, and he said he remained confident about the future.

Oracle has spent more than $20 billion buying rivals such as Siebel Systems and PeopleSoft over the past three years to challenge SAP in business applications as its core database software market matures. Oracle announced this month it would pay $3.3 billion for Hyperion Solutions.

New license revenue rose to $1.39 billion from $1.1 billion in the third quarter ended Feb. 28. Sales of new software applications, including acquisitions, rose 57% while new database and middleware software license sales increased 17%.

Oracle's stock trades at a price-to-earnings ratio of about 17 times 2007 estimates, below the multiples of Microsoft and SAP, which trade at 19 times and 21 times 2007 earnings, respectively.

The results from the world's biggest database software maker mark a contrast to German rival SAP, which said in January it missed a key 2006 sales target, fueling concerns that big companies might be holding back on technology spending.

"I was impressed to see the revenue came in nicely higher than the Street had expected," said Kim Caughey, who helps manage some $1 billion of assets at Fort Pitt Capital Group. "These guys are on the first line of companies determining whether to spend more on infrastructure."

"It is good to see that they are, at least in this quarter."

Oracle's fiscal third-quarter net profit rose to $1.03 billion, or 20 cents a share, from $765 million, or 14 cents a share, a year ago. Excluding items, Oracle had a per-share profit of 25 cents.

Revenue rose to $4.4 billion from $3.47 billion as Oracle sold more software that helps companies manage everything from accounting to human resources to inventory management.

Analysts, on average, were forecasting a per-share profit before items of 22 cents on revenue of $4.33 billion, according to Reuters Estimates.

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