A Bright Spot In Another Down Quarter For Oracle

Oracle's sales and earnings continued to shrink in its second quarter. But a rebound in database-software sales and growing license-update revenue finds Oracle execs confident that they're on the brink of resuming sales growth.

"We were fairly satisfied with our quarter. It showed solid improvement in [the] year-over-year negative growth that we've been experiencing for a while," CFO Jeff Henley says. "We expect to move into positive ground in the third quarter."

Sales for the quarter, ended Nov. 30, were $2.3 billion, down 3% from the same period last year. That included a nearly 7% drop in new-license sales to $764.9 million--better than the expected 10% to 15% decline--and a 13% slide in service-related revenue to $590 million. But revenue from license updates and product support increased more than 8% to $953.6 million. While not divulging details, Henley says sales of database software grew in the quarter, while application sales declined.

Oracle reported net income of $534.9 million, or 10 cents per share, for the quarter, down nearly 3% from $549.5 million, or 10 cents per share, one year ago. Earnings included a $21.8 million charge for equity security-related losses, including $15 million for Oracle's investment in Liberate Technologies.

This is the seventh quarter that Oracle has reported shrinking revenue. But the company may have bottomed out in the third and fourth quarters of fiscal 2002 when sales dropped 16% year over year. For the current quarter, Oracle expects 0% to 4% revenue growth, with earnings of 9 to 10 cents per share.

Oracle is also restructuring its sales force, creating separate organizations that focus on technology software (database and app-server products) and applications. Henley says there could be some sales disruption during the reorganization.