Oracle Keeps Its Cool In Tech Spending Crunch

Oracle just finished the first fiscal year in its history in which sales declined, and the company doesn't expect IT spending to pick up much during the next six months. But it's predicting enough of a recovery in the first half of next year to avoid a repeat of its sales decline.

Oracle's not hitting any panic buttons. CFO Jeff Henley says the company has about 4% less staff than it did during its peak employment level of several years ago, and it's focused on holding onto employees for the day when IT spending picks up. The company's research and development staff has 12% more people compared with last year.

Oracle's Bumpy Ride FY '02 FY '01 Change Revenue $9.7 B $11.0 B -12% Net income $2.2 B $2.6 B -13% Data: Oracle

The company's fourth quarter, ended May 31, saw software license sales slide nearly 30% from the year before, while total revenue was down 15% to $2.8 billion. That led to a 23% decline in net income, to $655.9 million. New license sales were down 29% for database software and 27% for applications. The only upside was an 11% jump in upgrade sales, to $643 million. But big deals with new customers are hard to come by: Deals valued at more than $500,000 accounted for 43% of sales, down from 52% a year earlier. "We've definitely seen less of an appetite among customers to take on large projects," Henley says.

For the current quarter, Oracle expects license revenue to fall between 15% and 25% from the same period last year. But Henley is still predicting modest growth in 2003 revenue. One reason: With the Oracle9i database on the market for 18 months, he says more customers will opt for upgrades early next year.