Oracle Forecasts Higher Profit Growth

Oracle Corp. (ORCL), the world's second-largest business software maker, on Wednesday forecast 2005 and 2006 earnings above Wall Street estimates, helped by its $10.3 billion acquisition of PeopleSoft (search).

The outlook, which Oracle released hours before it kicks off its analyst day in New York, drove the stock up by 2.6 percent in premarket trade.

"We generally expect a positive tone regarding both the integration plans and the current pace of business," Adam Holt, an analyst with JP Morgan said. "The updated guidance reflects well on the current tone of the applications market."

Oracle said it expects 2005 earnings to grow 24 percent to 62 cents per share. Analysts on average expected 61 cents a share, with a range of 55 cents to 65 cents, according to Reuters Estimates.

For fiscal 2006, Oracle said it is targeting earnings per share growth of 22 percent to 28 percent, or 76 cents to 80 cents a share. That compares with analysts' average estimate of 71 cents a share. with a range between 59 cents to 81 cents a share.

Earlier this month. Oracle won kudos from Wall Street by slashing 5,000 jobs following the acquisition. But analysts are waiting for proof that it can meet revenue goals against a backdrop of stiff competition from larger rival SAP (search) and Microsoft (MSFT).

"The earnings per share guidance is achievable," said Trip Chowdhry, an analyst with FTN Midwest Research. "The question is whether revenue expectations can be met -- Oracle is facing very serious headwinds."

Germany's SAP said on Wednesday that it plans to add 3,000 jobs aimed at lifting license revenues by 10 percent to 12 percent this year. Last week, SAP bought TomorrowNow (search), which specializes in low-cost maintenance and support for PeopleSoft, and offered PeopleSoft users special deals to migrate to its system.

Microsoft also unveiled plans to court PeopleSoft customers.

Oracle shares rose to $13.95 on the Inet electronic brokerage, from a close of $13.59 on Tuesday on Nasdaq.