Oracle Corp's exhausting 18-month-long takeover battle for PeopleSoft generated high expenses which dragged down the company's third-quarter earnings, the Redwood City, Calif. software company revealed today.

Although Oracle's revenues increased 18% to $2.95 billion in the fiscal third quarter ended Feb. 28, the company's net income of $540 million was off 15% compared with the $635 million reported in the like period last year.

Oracle reported acquisition-related expenses during the quarter of $239 million. To date, expenses related the PeopleSoft takeover have totaled about $400 million, said Oracle co-president and acting CFO Safra Catz in a conference call with securities analysts. Oracle expects to report an additional $211 million in expenses related to the PeopleSoft deal in the current quarter, bringing the total to $611 million, Catz said.

Overall, Oracle's operating expenses for the quarter increased 38% compared with the third quarter of 2004.

Release of the Q3 results came hours after Oracle disclosed that it had outbid archrival SAP A.G. to acquire retail software vendor Retek Inc., (Minneapolis) in a transaction valued at $670 million. Oracle chairman Larry Ellison told analysts during the conference call that the company likely will take a break from major acquisitions for now.

"We had intended to take a break after the PeopleSoft deal, but the timing on Retek wasn't determined by us," said Ellison, who responded to SAP's initial $496 million bid for the company. "We thought retail was strategic for us, and we had to respond."

While expenses related to Oracle's acquisition strategy soared during the third fiscal quarter, new software license revenues from its applications business did not. For the quarter, Oracle reported new application software license revenue of $152 million, a 9% increase from the corresponding period last year. That figure, however, included $31 million in new PeopleSoft license revenues for the two months following consummation of the acquisition on Dec. 29, 2004. Excluding the Peoplesoft-related revenues, new license revenues from Oracle's core applications business dropped 13% compared to the year-earlier period.

Ellison attributed the fall-off in part to what he called a "modest distraction" which resulted from integration of the Oracle and PeopleSoft application sales and marketing forces. Ellison predicted there will continue to be some "minor impact" from the consolidation on fourth quarter application results. Overall, however, Ellison said Oracle still expects to achieve organic application license growth of about 10% per year.

PeopleSoft's contribution to Oracle's new license revenue would have been larger, Ellison said, but for PeopleSoft's push to maximize its revenues at the end of December, just prior to the Oracle takeover. "They bled the pipeline dry," said Ellison who predicted it will take "a couple of quarters" for Oracle to rebuild the Peoplesoft pipeline.