Oracle sees fall in Q1 revenue, profit

Blaming what it called "the worst technology climate we've seen" since the mid-1970s, Oracle on Tuesday reported financial results for its first fiscal quarter that were down in both profit and revenue terms from the same period last year.

Net income for the quarter was US$386 million, or $0.07 per share, excluding an impairment charge related to its investment in Liberate Technologies Inc. That compared to net income of $511 million, or $0.09 per share, in the same quarter a year ago, the company said in a statement.

The results were in line with financial analyst forecasts, which saw Oracle reporting a profit of $0.07 per share, according to brokers polled by financial watchdog company First Call/Thomson Financial. Revenue for the period, which ended Aug. 31, was $2.0 billion, down from $2.3 billion a year earlier, Oracle said.

Including the impairment charge and using U.S. Generally Accepted Accounting Principles (GAAP), Oracle's net income for the quarter came in at $343 million, or $0.06 per share.

Revenue from new software license sales, considered an important indicator of performance, fell by almost a quarter from a year earlier, to $549 million. Revenue from license updates increased 9 percent, to $620 million, the company said.

In the statement, Oracle's executive team cast the results in a positive light. Despite the down economy, its operating cash flow remains strong and -- despite falling from a year earlier -- its profitability remains high, Oracle Chief Financial Officer Jeff Henley said.

In a conference call with press and analysts he was less sanguine, describing the current climate as "the worst technology environment we've seen since 1974-75."

"We continue to believe that we should see gradual improvement on our year-over-year growth comparisons in these coming quarters, though my current view is that the rate of recovery could be a bit slower than I had said a quarter ago," Henley said, adding that it remains tough to predict how business will fare in the months ahead.

Revenue for Oracle's second quarter will probably be down by 4 percent to 7 percent from a year earlier, Henley said, better than the 10 percent revenue decline in the quarter just ended. Second-quarter earnings per share should come in at $0.08 or $0.09, he said.

Larry Ellison, Oracle's chairman and chief executive, reiterated his position that Oracle is not losing market share to competitors and blamed the results on the poor economy and other factors.

Oracle's results outside of the Americas showed "significant weakness," Henley said during the call-in. He said this was the first quarter for some time in which new license sales in the Americas had outperformed those overseas.

In Europe, sales were hampered by the introduction of a new compensation plan for Oracle's sales teams, which in the longer term should help the company, he said. In the Asia-Pacific region, especially Japan, business also was weak.

"In Japan for several quarters now we have seen very significant negative growth, and we expect that to continue for another couple of quarters," Henley said.

Asked why that might be, Ellison said Oracle sells indirectly to customers in Japan through its channel partners. "Because we're going through the channel, the downturn tends to hit us later and harder. We don't think the competitive climate has changed in Japan ... it's just a general slowdown," he said.

Oracle's installed base of customers has continued to grow, helping to boost revenue from license update rights and support services, Henley said in the statement. Revenue from product support services generated $349 million in the quarter, while consulting revenue was $432 million and education revenue came in at $63 million. First-quarter operating margins fell to 29 percent, however, from 33 percent a year earlier, the company said.

Oracle has about 200,000 database customers worldwide, Ellison said. About 25 percent of those have upgraded to its newest database, Oracle9i, and he said he expects that figure to reach 50 percent by year's end. Only about 100 customers have gone live with its Real Application Clusters software, although 1,000 customers have signed up for the product, Ellison said.

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