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Oracle beats forecast despite drop in profit

SOFTWARE maker Oracle Corp's results for its latest quarter topped Wall Street's forecast on Tuesday, despite a 5 percent drop in sales and a 7 percent decline in profit.

The firm blamed the declines on a stronger US dollar? which makes deals done in other currencies translate into fewer greenbacks. Companies also have shelled out less for new software due to the recession.

Still, Oracle's chief financial officer, Jeff Epstein, said in a statement that Oracle executed "substantially better" than the company expected. A key reason: better sales of support contracts, which are a cash cow for Oracle even in bad times.

"It's kind of hard to complain, isn't it?" said Patrick Walravens, an analyst with JMP Securities. "Flawless might be a bit strong, but I think it was better than just about anybody expected. ... The big question is, now what?"

There weren't any big surprises in Oracle's guidance, which is a good thing considering the uncertainty about the economy. Oracle offered a sales forecast for the current quarter that was slightly better than expected, while its profit forecast was within the expected range.

Oracle, which is based in Redwood Shores, said its net income from March through May was US$1.89 billion, or 38 US cents per share. In the same period last year, it was US$2.04 billion, or 39 US cents per share.

Excluding stock-based compensation and one-time items, Oracle said it earned 46 US cents per share, which was 2 US cents better than the average estimate of analysts polled by Thomson Reuters.

Sales fell to US$6.86 billion, nearly US$400 million better than the analyst estimate.

Sales of new software licenses fell 13 percent to US$2.74 billion, indicating Oracle's customers are being tightfisted about upgrading to new programs.

They still have to maintain their older software, though, and in most cases they'll pay Oracle to do it. Oracle's revenue from software license updates and product support rose 8 percent to US$3.05 billion in the latest quarter. That segment made up 44 percent of Oracle's overall revenue.

The next few months will mark a pivotal time for Oracle, a serial acquirer that's headed into new territory with its US$7.4 billion acquisition of Sun Microsystems Inc, a deal that makes some industry observers nervous.

Oracle is the world's leading maker of database software, and has expanded aggressively into other areas, like business applications. It's even going to make hardware now, provided the Sun deal goes through as expected.



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