Oracle delivers Q3 results ahead of targets

Oracle released a strong third quarter for fiscal 2007, beating both its own and analysts' predictions.

Oracle has reported third-quarter results which exceeded both the software vendor's and analysts' predictions.

In third-quarter results for the period ended February 28, Oracle saw net income grow 35 per cent over the year-ago quarter to $US1.03 billion, while revenue grew 27 per cent to $US4.41 billion. Earnings per share (EPS) rose 36 per cent to $US0.20.

Discounting the impact of recent acquisitions and other factors, Oracle's pro forma net income grew 30 per cent to $US1.3 billion compared with the third quarter of fiscal 2006. Pro forma revenue increased 26 per cent to $US4.45 billion, and pro forma EPS was up 31 per cent to $US0.25.

A consensus estimate of Thomson Financial analysts had predicted that Oracle would report pro forma revenue of $US4.3 billion and pro forma EPS of $US0.23.

"Both revenue and earnings growth accelerated sharply in the third quarter," Oracle co-president and chief financial officer, Safra Catz said in a press release. "We exceeded guidance on every metric with strong revenue growth across all product lines and in all geographies."

Overall software revenue grew 25 per cent to $US3.5 billion with new license revenue from Oracle's database and middleware growing 17 per cent, while new license revenue from the vendor's applications rose 57 per cent. Total revenue from services was $US916 million, an increase of 36 per cent compared to the year-ago quarter.

Oracle CEO, Larry Ellison, claimed his company's middleware business exceeds that of pure-play middleware player, BEA Systems. "Not only are we growing faster than BEA, we're now larger than they are in the middleware business," he said in the release.

Oracle is also hard at work trying to become the number-one business applications vendor as it competes with its bitter rival and market leader, SAP.

As Oracle continues aggressively acquiring new companies, what remains unclear is the growth in sales of application software licenses excluding recent purchases. In other words, how well are the vendor's core applications selling? Although Oracle posted strong overall results back in December for its second quarter of fiscal 2007, analysts noted signs of weakness in the company's growth in relation to software license revenue.

Oracle said it missed its target for software revenue growth in the second quarter, blaming deals didn't close in time for the end of that financial period. Analysts are also keen to find out how well Oracle's plan to offer full support for Red Hat's Enterprise Linux is progressing. Oracle announced the move in October, but has yet to talk publicly about how many customers have opted for the offering.

At the start of this month, Oracle announced plans for another major acquisition, agreeing to buy business intelligence software vendor Hyperion Solutions for $US3.3 billion in cash. Subject to regulatory conditions, the deal is set to close next month.

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