Update: Oracle Q4 profit rises 31 percent

Oracle reported net income up 31 percent year on year for its fourth fiscal quarter, on revenue up 2 percent over the year-earlier quarter. Revenue from software license updates and product support rose most strongly, while services revenue declined 11 percent, the company announced Thursday.

Total revenue in the fourth quarter rose 2 percent year on year, to $2.83 billion. Of that, $1.07 billion came from software license updates and product support, up 12 percent compared to a year earlier, and $580 million from services, down 11 percent. Other revenue, including new software licenses, rose just 1 percent over the year, to $1.19 billion.

Revenue for the full fiscal year 2003 was down 2 percent on the previous year, to $9.47 billion.

Net income for the quarter to May 31 totaled $858 million and earnings per share was 16 cents, beating the consensus estimate of 14 cents per share compiled by Thomson First Call from the estimates of 36 analysts. In the year-earlier quarter, Oracle reported net income of $656 million and earnings per share of 12 cents.

“Earnings per share exceeded our guidance, based on lower expenses,” Chief Financial Officer Jeff Henley said during a conference call with analysts following the release of the results.

For the full year, revenue from the Americas slipped 8 percent year on year to $4.84 billion. In Europe, the Middle East and Africa, revenue rose by 7 percent year on year to $3.25 billion, and in Asia-Pacific it rose by 3 percent to $1.38 billion.

The spread of severe acute respiratory syndrome (SARS), at its worst in Asia, did not have an impact on the quarter, and in fact Oracle continued to do worse in the Americas than in the rest of the world, Henley said.

Employee numbers are also on the rise in Asia.

“We saw a small headcount growth sequentially of 261 people that we are putting in the low-cost areas such as India, primarily in research and development,” Henley said.

Henley also outlined two changes in revenue sources hidden behind the headline figures presented in Oracle’s financial report.

Customers are switching from licensing individual Oracle applications to paying for a whole suite. “A year ago, 11 percent [of customers] were on that suite pricing; this quarter we were on 27 percent. It clearly indicates customers are buying into using more and more of that suite over time,” he said.

The other significant change is that outsourcing revenue has more than doubled, he said.

Oracle groups outsourcing with advanced product services, including remote database management, performance monitoring, on-site technical support services and hosting services, a sector that declined by 20 percent to $257 million for the fiscal year, compared with the previous year. Next quarter, advanced services revenue will remain flat, Henley said, with a decline in revenue from discontinued field services offset by the growth in outsourcing. “A year from now, we think outsourcing will be the bulk of this number,” he said.

Chairman and Chief Executive Officer Larry Ellison spoke mainly of Oracle’s hostile takeover bid for PeopleSoft, saying that he wanted to give PeopleSoft shareholders and customers a choice.

Indeed, he said, companies such as Merrill Lynch are already choosing to turn off PeopleSoft applications and pay for Oracle licenses. If Oracle’s bid for PeopleSoft is successful, then PeopleSoft customers will be offered Oracle licenses free of charge, he said. 

“We have not made a very large acquisition before, but we are consolidators. If the opportunity presents itself, it’s something we are likely to do,” Ellison said of the prospect for future acquisitions.

Total revenue for the next quarter will rise by between 4 percent and 7 percent year-on-year, Henley said, speaking of other prospects for the future. New license revenue in the next quarter will rise by between 2 percent and 12 percent year on year, and earnings per share will be between $0.07 and 8 cents, he said.

“We will see continuing improvement in the economy, and we are doing better competitively,” he said.

“As time passes, people buy more computers, and they have a need for more databases. We think software goes through the same inventory cycle [as hardware] so with every 30 days that go by, things get better,” Henley said.

Trading in Oracle shares closed Thursday at $13.33, an increase of 0.45 percent on the day, before the company announced its earnings.