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Oracle says Q1 earnings on target

Software sales are down, but Oracle says its fiscal first-quarter earnings hit the mark.

Despite plummeting software sales, Oracle today reported on-target earnings for its fiscal first quarter.

In a teleconference, Oracle reported that it earned $440 million, or 8 cents per share, for the first quarter, compared with profits of $343 million, or 6 cents per share, a year ago. The company earned 7 cents a share, excluding special items in the year-earlier period, and operating margins improved to 30% from 29% a year earlier.

Revenue for the quarter came in at $2.07 billion, falling short of Wall Street's consensus estimate of $2.14 billion. Sales in the same quarter a year ago were $2.03 billion.

Oracle chief financial officer Jeff Henley was optimistic, predicting a second-quarter profit. Oracle's first quarter ended Aug. 31.

The Redwood Shores, Calif.-based software maker said software license sales were a major disappointment, falling 7% from a year ago, to $525 million. Wall Street looks at new software licenses closely because they are a measure of whether Oracle is adding more customers.

Addressing the lag in software license sales, Henley predicted a good rebound and growth in the second quarter.

"We've felt all along that it's going to be a slow recovery," he said. "I think clearly that we stumbled on execution issues getting started in the first quarter, and that is not atypical."

Henley also said the company expects to see continued improvement in total revenue and new license growth in the second quarter led by the company's North America market.

The company did not offer much detail about its bid to buy PeopleSoft Inc., only to say that it expects the regulatory process to be completed in November -- and company officials remain optimistic.

Oracle CEO Larry Ellison said the company is optimistic about the release of its 10g database and application server, announced to the public at OracleWorld in San Francisco this week. Oracle 10g is the first database designed to run on a grid of 64 to 128 low-cost Linux Intel servers.

"People are going to be able to easily migrate their applications from expensive servers to a grid of these inexpensive machines," Ellison said. "This takes our most important product, the foundation of our company, and really differentiates it from Microsoft and IBM."

Ellison said the company has seen growth among customers running the Oracle 9i database with the Real Application Clusters (RAC) option, allowing a database to be installed across multiple servers. The company currently has more than 2,600, with 30% running on Linux Intel hardware, he said.

As companies migrate to 10g, the company should see accelerated growth in RAC adoption, he said.


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To provide your feedback on this article, contact Robert Westervelt.

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