Oracle Corp.'s quarterly profit slipped for the first time in three years as a stronger dollar hobbled its international sales, but the business software maker reassured investors by predicting it should still thrive despite the deepening recession.
The optimistic guidance offered late Thursday eclipsed any concerns raised by Oracle's fiscal second-quarter results, which were distorted by wild currency fluctuations driven by the biggest financial crisis since the Great Depression.
Oracle shares gained nearly 3 percent in extended trading as investors digested the developments.
The Redwood Shores, Calif.-based company said it earned $1.3 billion, or 25 cents per share in the three months ended in November. The net income dipped by $7 million from the same time last year while the earnings per share remained the same.
Although it was negligible, the erosion marked Oracle's first decline in profit since its fiscal quarter ending in November 2005.
Investors, though, focus primarily on how Oracle would have fared if it didn't have to account for expenses covering employee stock compensation and its acquisition spree of the past four years.
Excluding those factors, Oracle said it would have earned 34 cents per share — matching the average estimate among analysts polled by Thomson Reuters.
But Oracle's revenue of $5.61 billion, up 6 percent from last year, didn't live up to analyst expectations. On average, analysts had projected revenue of $5.84 billion.
Oracle's sales of new product licenses — a key measure of a software maker's health — also drooped. Software sales totaled $1.63 billion, down 3 percent from last year.
In September, management had predicted that its software license would rise anywhere from 2 percent to 12 percent.
But that forecast didn't envision the dollar rising as rapidly as it did against the euro and other key currencies during October and November after a string of failures and other troubles at major banks triggered a financial panic.
Like many other tech bellwethers, Oracle is vulnerable to currency swings because about half of its revenue comes from outside the United States.
Besides hurting its international sales, the stronger dollar had the effect of exposing more of Oracle's sales to higher U.S. tax rates — a factor that deflated the company's earnings.
If currencies had remained unchanged from last year, Oracle said its fiscal second-quarter profit would have been up by 10 percent and revenue would have been 12 percent higher. And software sales would have increased 5 percent.
"Now, of course, obviously currency was not the only news going on in the quarter in the outside world and yet we feel just extremely good about our results," Safra Catz, Oracle's co-president, told analysts in a Thursday conference call.
Oracle felt enough confident to project adjusted earnings of 34 cents to 36 cents per share in the current quarter ending in February. Analysts, on average, expect 34 cents per share. The company anticipates its revenue in the current quarter will rise 8 percent to 11 percent, also falling within the range of analyst expectations.
If currencies remain at the same level in the current quarter as they were in the prior year, Oracle believes its sales of new licenses should range anywhere from a 2 percent decrease to an 8 percent increase.
Investors apparently liked what they heard. After falling 13 cents to finish Thursday's regular session at $16.61, Oracle shares rebounded by 49 cents to $17.10 in extended trading.
Oracle is counting on the recurring stream of money that it collects for product upgrades and maintenance to offset any weakness in its software sales. These lucrative maintenance contracts account for more than $11 billion in revenue, accounting for nearly half of Oracle's business.
Other major technology companies have been laying off workers and trimming expenses in other areas to shore up profits, but Oracle isn't making any radical changes yet — another sign that its chief executive, Larry Ellison, believes the software maker is in good shape even if the economy isn't.
Some analysts had predicted Oracle would join in the cost-cutting parade, but the company is still expanding its payroll. Oracle ended November with 86,657 employees, adding about 1,500 workers since August.
The optimistic guidance offered late Thursday eclipsed any concerns raised by Oracle's fiscal second-quarter results, which were distorted by wild currency fluctuations driven by the biggest financial crisis since the Great Depression.
Oracle shares gained nearly 3 percent in extended trading as investors digested the developments.
The Redwood Shores, Calif.-based company said it earned $1.3 billion, or 25 cents per share in the three months ended in November. The net income dipped by $7 million from the same time last year while the earnings per share remained the same.
Although it was negligible, the erosion marked Oracle's first decline in profit since its fiscal quarter ending in November 2005.
Investors, though, focus primarily on how Oracle would have fared if it didn't have to account for expenses covering employee stock compensation and its acquisition spree of the past four years.
Excluding those factors, Oracle said it would have earned 34 cents per share — matching the average estimate among analysts polled by Thomson Reuters.
But Oracle's revenue of $5.61 billion, up 6 percent from last year, didn't live up to analyst expectations. On average, analysts had projected revenue of $5.84 billion.
Oracle's sales of new product licenses — a key measure of a software maker's health — also drooped. Software sales totaled $1.63 billion, down 3 percent from last year.
In September, management had predicted that its software license would rise anywhere from 2 percent to 12 percent.
But that forecast didn't envision the dollar rising as rapidly as it did against the euro and other key currencies during October and November after a string of failures and other troubles at major banks triggered a financial panic.
Like many other tech bellwethers, Oracle is vulnerable to currency swings because about half of its revenue comes from outside the United States.
Besides hurting its international sales, the stronger dollar had the effect of exposing more of Oracle's sales to higher U.S. tax rates — a factor that deflated the company's earnings.
If currencies had remained unchanged from last year, Oracle said its fiscal second-quarter profit would have been up by 10 percent and revenue would have been 12 percent higher. And software sales would have increased 5 percent.
"Now, of course, obviously currency was not the only news going on in the quarter in the outside world and yet we feel just extremely good about our results," Safra Catz, Oracle's co-president, told analysts in a Thursday conference call.
Oracle felt enough confident to project adjusted earnings of 34 cents to 36 cents per share in the current quarter ending in February. Analysts, on average, expect 34 cents per share. The company anticipates its revenue in the current quarter will rise 8 percent to 11 percent, also falling within the range of analyst expectations.
If currencies remain at the same level in the current quarter as they were in the prior year, Oracle believes its sales of new licenses should range anywhere from a 2 percent decrease to an 8 percent increase.
Investors apparently liked what they heard. After falling 13 cents to finish Thursday's regular session at $16.61, Oracle shares rebounded by 49 cents to $17.10 in extended trading.
Oracle is counting on the recurring stream of money that it collects for product upgrades and maintenance to offset any weakness in its software sales. These lucrative maintenance contracts account for more than $11 billion in revenue, accounting for nearly half of Oracle's business.
Other major technology companies have been laying off workers and trimming expenses in other areas to shore up profits, but Oracle isn't making any radical changes yet — another sign that its chief executive, Larry Ellison, believes the software maker is in good shape even if the economy isn't.
Some analysts had predicted Oracle would join in the cost-cutting parade, but the company is still expanding its payroll. Oracle ended November with 86,657 employees, adding about 1,500 workers since August.
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