A rebound in its applications business and stronger-than-expected sales from recently acquired BEA Systems helped Oracle Corp. defy the weak economy and post healthy results in its fourth fiscal quarter.
The database and applications company, however, yesterday cautioned that economic uncertainty might slow growth in the current quarter.
For its fourth fiscal quarter, ended May 31, Oracle reported that overall revenue grew to $7.2 billion (€4.57 billion), a jump of 24% over the same quarter a year ago. Revenue from new software licenses was up 27%, while revenue from maintenance and product support rose 25%. The company reported fourth-quarter net income of $2 billion (€1.27 billion), up 27%.
BEA accounted for $93 million (€59 billion) in new software revenue during the quarter, a result that “exceeded our expectations significantly,” said Oracle Co-President Safra Catz, who credited pent-up demand following the acquisition for the strong BEA revenue.
For the full fiscal year, Oracle had revenue of $22.4 billion (€14.2 billion), up 25% from 2007 revenue of $18 billion (€11.4 billion), . New software license revenue was up 28% for the year to $7.5 billion (€4.8 billion), while maintenance and support revenue rose 25% to $10.3 billion (€6.5 billion). Oracle’s net income for the full year was $5.5 billion (€3.5 billion), a 29% increase over fiscal 2007.
“We like our strategy and we like our execution,” said Oracle CEO Larry Ellison in comments to financial analysts.
“At our size, fiscal year ’08 would have been considered a great year when the economy is booming,” Catz added. “The fact that we put up these results in these times demonstrates that our strategy is working and that our team is executing across the board.”
Oracle officials, however, sounded a note of caution about the company’s financial prospects for the current quarter, which runs through August 31. Although Oracle’s order pipeline remains strong, Catz said, the company is projecting a new software license revenue increase of 10% to 20% and a total revenue rise of 18% to 20%.
“We are aware of the broader economic environment, but confident in our model and our ability to deliver earnings growth in ’09,” Catz said.
In addition to BEA’s strong performance, Oracle’s applications business contributed to the healthy fourth-quarter results. Applications revenue for the period grew by 30% to $2 billion (€1.27 billion), compared with $1.6 billion (€1 billion) in the fourth quarter of 2007. Applications revenue from new licenses grew by 36% to $989 million (€628 million), while revenue from maintenance and support was up 25% to $1 billion (€635 million).
In the Americas, new license revenue from Oracle’s applications business grew during the quarter by 33%; in Europe/Middle East/Africa, 41%; and in Asia, 37%.
The strength of the applications business represented something of a turnaround compared with the third quarter of fiscal 2008, when new license revenue grew by 7% overall and just 1% in the Americas. Oracle officials at the time blamed the disappointing applications revenue on the slowing economy, particularly in the United States, saying it caused prospective customers in some cases to delay applications purchase decisions.
This week, Catz said Oracle was able to close many of those delayed deals in the fourth quarter.
Oracle’s database and middleware business also grew significantly during the quarter. Revenue from database and middleware products was up 23% during the quarter to $3.9 billion (€2.5 billion), while new license revenue was up 23%, to $2.2 billion (€1.4 billion).
Oracle’s only soft spot during the quarter was database and middleware revenues in the Asia/Pacific region, which grew just 6%. Ellison said Oracle has made management changes in that region and expects growth to improve.
The company also reported solid growth in the on-demand part of its business. Revenue from on-demand software was up 29% during the fourth quarter, to $194 million (€123 million). In remarks to financial analysts, Ellison acknowledged that on-demand remains a very small part of Oracle’s overall business, but said that was, at least in part, by design. Until the most recent quarter, he said, Oracle had not made a profit selling on-demand software.
“The last thing we want to do is have a very large business that isn’t very profitable and drags our margins down,” Ellison said. Now that the on-demand business is profitable, he said, Oracle expects to grow it faster.
In answer to analysts’ questions, Ellison said Oracle’s Fusion Applications new product development initiative is on schedule. The company has said it plans this year to release a new set of applications based on service-oriented architecture technology and the best functionality of Oracle’s existing applications. Ellison, however, said it will take some time for Oracle to deliver Fusion versions of all of its existing applications.
“It will take some time before we get all the way through all the different applications that we offer,” he said. “But there will be a suite of Fusion Applications coming out this year, next year, and the year after.”
Overall, Oracle officials said, the company will continue with its current strategy, which involves integrating acquired applications. That, Catz said, gives the company a chance to cross-sell more products to existing customers. Oracle also will continue to focus on large- and medium-sized enterprise customers and to concentrate on selling ERP extension applications to companies in vertical industries, including retail, telecommunications, banking, insurance, healthcare, utilities, and government.
“We feel our strategy has a lot of time ahead of it,” Catz said. “If this were a nine-inning baseball game, I’m not sure we’re even in the second inning yet.”