Oracle Net Income Rises 16 Percent, Beats Expectations

Oracle Corp. (ORCL) Tuesday reported a 16 percent rise in quarterly net income as the world's second largest software company benefited from steady demand for its flagship database software.

Net income in the fiscal first-quarter rose to $509 million, or 10 cents a share, from $440 million, or 8 cents a share, a year earlier.

Total revenue for the quarter ended Aug. 31 rose 7 percent to $2.22 billion, from $2.07 billion a year earlier.

Analysts polled by Reuters, on average, expected earnings of 9 cents per share on revenue of $2.23 billion.

Shares of Oracle, which last week won a court ruling allowing it to proceed with its hostile takeover offer for PeopleSoft Inc. (PSFT), rose to $11.05 in after-hours trade on the INET system after closing at $10.55 on the Nasdaq.

Oracle Chief Executive Larry Ellison (search) said in a statement the database business, which has comprised about 80 percent of total license revenue in recent quarters, continued to post strong growth, with average growth of about 17 percent in the past three quarters.

Bernstein analyst Charlie Di Bona said the database business is increasingly driving Oracle's profits.

"What is interesting about these numbers is that they show that the leverage is in the database business and not the applications business," he said.

Harry You, Oracle's chief financial officer, told reporters in a conference call that deals in its business software applications business, which has comprised about 20 percent of total license revenue, "were taking longer" to close.

Analysts have cited concerns about the company's ability to grow its applications segment.

Di Bona called the 36 percent drop in revenue for the applications business "horrible," but said it was no longer a key element.

"What does not matter to Oracle? Applications," said Di Bona, who does not own Oracle stock.

Oracle said new high-margin software license sales grew 7 percent in the quarter to $563 million. Oracle had forecast software license revenue in the quarter to rise by 5 percent to 15 percent.

License revenue is a key barometer of future maintenance revenue to which analysts have attached increasing importance as a recurring source of sales. Maintenance revenue includes items such as upgrades to existing software products.

Oracle shares have gained about 7 percent since last Thursday when a federal judge ruled on the PeopleSoft bid. The stock, however, is down about 20 percent on the year.

The ruling on Oracle's $7.7 billion hostile bid for PeopleSoft deal could be appealed by the U.S. Justice Department. Any deal also would require approval from European Union (search) antitrust regulators.