Oracle Brings Good Cheer

Updated from Dec. 19

SAN FRANCISCO -- Ho. Ho. Ho. Oracle(ORCL) delivered a jolly second-quarter earnings report Wednesday.

The news helped push the stock up 6% to $22.09 in pre-market trading Thursday.

For the quarter ended Nov. 30, the Redwood City, Calif., business-software company posted earnings of $1.30 billion, or 25 cents a share, up 35% from $967 million, or 18 cents a share, a year ago.

Excluding items, EPS was 31 cents. Analysts were looking for EPS, less items, of 27 cents.

Revenue soared 28% to $5.31 billion from $4.16 billion last year, Analysts polled by Thomson Financial were expecting a top line of $5.04 billion.

The company's guidance also offered some upside to Wall Street's forecast. Chief Financial Officer and Co-president Safra Catz said on a conference call that third-quarter revenue should grow 21% to 24% year over year, implying revenue of $5.297 billion to $5.429 billion.

The company expects earnings, before items, of 29 cents or 30 cents a share, Catz said.

Analysts had forecast a top line of $5.19 billion and EPS of 29 cents.

In the second quarter, total middleware and database license revenue rose 28%. The company's middleware revenue jumped 80%, while its mainstay database software revenue grew 19%.

Applications revenue climbed 63%, said CEO Larry Ellison, while new software license sales grew 38%.

Oracle's operating margin was 41.3% during the quarter, up from 38.8% a year ago, Catz said. The company's goal is to eventually lift operating margins to 50%.

In response to questions regarding the worsening macroeconomic outlook, Ellison said Oracle's extension into software for industry verticals will help insulate the company.

While clients can put off buying some core applications for a couple of years, much industry-specific software is critical to their businesses, particularly in the telecom industry, which is upgrading, he said.

"The beyond-ERP (enterprise resource planning) strategy is more resilient during a downturn," he said.

Apparently sending a subtle message to shareholders of BEA Systems(BEAS) to pressure directors if they wants a deal done for the middleware provider, Catz said "No friendly deal can be done" with the current BEA board "at a price acceptable to Oracle."

BEA's board rejected Oracle's $17-a-share buyout offer in October. BEA is due to hold its annual meeting in early 2008.

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