Updated from 7:02 p.m. EDT

Oracle ( ORCL) beat its own earnings expectations for its fiscal fourth quarter, but the news was nearly eclipsed by the increasingly ugly fight to take over rival software maker PeopleSoft ( PSFT).

As Oracle CEO Larry Ellison was announcing his company's stronger-than-expected results, J.D. Edwards ( JDEC) announced that it was suing Oracle for allegedly disrupting its planned merger with PeopleSoft. Oracle dismissed the suit as "having no merit whatsoever."

And Ellison strongly implied that he won't raise his current $16-a-share offer. "Our all cash offer is a much safer way for PeopleSoft shareholders to go," he said during a conference with analysts.

Fourth-quarter net income for the database giant increased 31% year over year to $885 million, or 16 cents a share, compared with net income of $656 million, or 12 cents a share last year. Total revenue for the May quarter was $2.83 billion, up from $2.77 billion a year ago.

Earlier in the month, the company told investors to expect earnings of 14 cents or 15 cents a share, a bit stronger than its initial guidance for the quarter of 12 cents to 15 cents.

Analysts polled by Thomson First Call expected the company to earn 14 cents on $2.75 billion in revenue for the quarter ended May 31, compared with 12 cents a year earlier.

New software license revenue rose 1% to $1.2 billion; software license updates and product support increased 12% to $1.1 billion, but services declined 11% to $580 million. Operating margin in the quarter was a record 45%, eclipsing the previous record of 44% in the fourth quarter of 2002, the company said.

Looking to the current quarter, Oracle expects earnings of 7 cents to 8 cents -- Wall Street is expecting 8 cents -- while revenue grows by 4% to 7%. New license revenue is expected to grow by 2% to 12%, the company said.

Oracle's improved performance comes as investors are focused on the company's hostile $5.1 billion bid to buy PeopleSoft, which is itself attempting a friendly takeover of rival software maker J.D. Edwards.

For the quarter, Oracle's revenue from new application licenses was essentially flat year over year at $246 million, but higher than many analysts had expected. Oracle CEO Larry Ellison pointed to the application results as evidence that his company is overtaking PeopleSoft on its home grounds.

"Many of our major competitors showed significant license revenue declines in their most recently reported quarter. For instance, in PeopleSoft's most recent quarter their applications new license revenues decreased 39% to $80 million. We believe that our growth and PeopleSoft's decline resulted in part from an increase in our competitive win rate over PeopleSoft, and the fact that we are beginning to replace PeopleSoft at a number of major accounts," he said in a prepared statement.

For the year, however, new application license revenue was off 14.4%, to $605.2 million, from $706.6 million.

Cameron Steele of RBC Capital Markets noted that Oracle, which historically has had a weak applications business, took share in the fourth quarter from Siebel Systems ( SEBL) and J.D. Edwards, as well as from PeopleSoft. But not from SAP ( SAP), a company some analysts think could benefit from the turmoil in the software industry. (RBC does not have a banking relationship with Oracle.)

Oracle's core data business improved in the last quarter, rising 3% to $933.5 million, from $904.3 million, while dropping 4.4% for the year, to $2.62 billion, from $2.74 billion.

Earlier Thursday, PeopleSoft said its board voted unanimously to recommend that stockholders reject Oracle's takeover bid, and Oracle responded by expressing disappointment in the action. The company has given no sign that it will back off the attempt. Many analysts believe that Oracle's bid of $16 a share is too low, and before today's flurry of announcements had expected Ellison to sweeten the deal.

For the year, net income increased 4% to $2.31 billion, or 43 cents a share, a penny better than analysts expected. But total revenue was off 2% to $9.5 billion.

After closing higher by 6 cents, or 0.5%, to $13.33, in regular trading, Oracle was up 19 cents in after-hours trading.