Oracle Corp. today reported stronger than expected fiscal fourth-quarter financial results, with its much-watched applications software business posting a 52% increase in new license revenues compared with last year.
The applications business, which for the first time reflects the full inclusion of the former PeopleSoft company, grew to $1.4 billion in revenue overall for the fourth fiscal quarter, compared with $703 million in the year-ago quarter. New license revenue grew to $350 million, compared with $231 million a year ago.
Overall, Oracle said that total software revenues for the quarter, which also includes its core database and middleware products, grew 31% to $3.3 billion. Net income grew 35% to $1.36 billion. Earnings per share jumped 36% to $0.26, three cents higher than guidance the company had provided earlier.
For the full fiscal year, total revenue rose 19% to $12.1 billion, with software revenues up 21% to $9.7 billion. Net income grew 29% to $3.5 billion. The applications business reached $3.5 billion in revenue for the full year, from $2.4 billion last year. (All numbers are reported on a non-GAAP basis.)
Oracle president Safra Catz, who has also been acting as chief financial officer, said the company expects total revenues to grow 32% to 34% in its fiscal 2006 first quarter and for the full year to rise 17% to 19%. She raised earnings estimates for the full year to between 78 and 81 cents a share.
In a conference call with financial analysts, Oracle executives emphasized, with regard to the now merged Oracle and PeopleSoft applications businesses, that development and sales "is now completely integrated" and there was no way to quantify the performance of the former PeopleSoft product lines with Oracle products. "There is no way to break out PeopleSoft sales from Oracle sales with any precision," said Oracle CEO Larry Ellison.
But Ellison and Oracle president Charles Phillips did say that they believed Oracle applications are gaining market share against chief competitor SAP in North America. "We think we're gaining market share in the applications business," Ellison said. "SAP is a strong competitor, but we continue to gain share in North America." He did not provide any market share numbers.
Phillips noted that over the past five months, Oracle has been conducting a road show around the U.S. to promote Project Fusion, its roadmap for the Oracle and PeopleSoft applications, as well as Oracle Fusion Middleware, and that many SAP customers have attended these sessions.
He also said that Oracle has either replaced SAP or won in head-to-head competition software deals in a number of companies. He cited Cingular, Hitachi, Toyota and Cisco, among others.
"We think we can beat SAP in North America and globally in a number of industries," Ellison said, claiming that Oracle is already stronger than SAP in engineering and construction, banking, telecommunications and healthcare.
SAP is expected to report its results for the second quarter on July 21. In its quarter ended March 31, SAP reported an 11% increase in revenues, fueled primarily by growth in the U.S.
An SAP spokesman declined to comment on specific Oracle claims of customer wins, but did say with regard to Oracle's market share statements: "Any market share claims by Oracle would be difficult to substantiate until SAP reports in July."
Jim Shepherd, a vice president at AMR Research, a market research and analysis firm in Boston, questioned whether Oracle has indeed gained market share against SAP in North America. "I don't believe that's the case, but it's almost impossible to ascertain," said Shepherd. The reason, he noted, is that the two companies account differently by geography and have different quarterly reporting periods.
On the quarter's results, Shepherd said Oracle's performance in applications reflected strong similarities between PeopleSoft and Oracle. "They were really similar companies," Shepherd said. "The integration of the two businesses was nowhere near as difficult as some thought. And there has not been a revolt in the PeopleSoft base at all."
The upbeat fiscal Q4 results follow a disappointing Q3 in which Oracle blamed costs associated with the PeopleSoft acquisition for dragging down earnings.
Meanwhile to help manage "Street" expectations and to assist with the company's aggressive M&A plans, Oracle last week named Gregory B. Maffei, a former chief financial officer of Microsoft, as president. He will assume the role of chief financial officer from Catz in July. Maffei will join Catz and Phillips as co-presidents of Oracle.