beat Street expectations after the close Tuesday by announcing a 40% increase in net income.
The Redwood Shores, Calif.-based company netted 26 cents per share for the quarter ended Nov. 30, topping
First Call/Thomson Financial's
estimate of 22 cents.Oracle reported net income of $384 million, up from $274 million, or 19 cents a share, a year ago.
The numbers brought back the company's quarterly tradition of surprising analysts, interrupted for the first time when it met expectations in August.
The stock rallied modestly in volatile trading then sank with the broader
decline throughout Tuesday. Shares closed down 2 7/8, or 4%, at 76 15/16. After hours, the stock jumped 8%, or 6 1/16, to 83.
"All in all it was a solid quarter," said
Gruntal & Co.
analyst Vivek Rao, who rates the stock outperform. "Revenues were in line with what I expected. Earnings per share were significantly better than my expectation of 21 cents." Gruntal has not underwritten any recent offering from Oracle.
"The No. 1 thing that we are watching is (software) licensing revenue," said Stephen Palfrey, an analyst at
Sanford C. Bernstein
who rates the stock outperform and was expecting a penny more than the consensus average. "They missed analysts' expectations of license revenue growth with 9% (last quarter). People were looking for 10% to 13% growth."
Software licensing, however, jumped 18% in this quarter to $819 million. Database software increased 17% to $651 million, while applications software sales increased 31% to $168 million. Revenue from services increased 10% to $1.4 billion.
Palfrey said licensing growth anywhere from 12% to 15% for this quarter would be good. "But this is a difficult comparison over a particularly good quarter last year," he noted. Any number over 15% to 16% makes a "very, very strong quarter," Palfrey said.
Sales for the quarter jumped 18% to $2.3 billion from $2.1 billion the same period last year.
"The growth of corporate intranets and the World Wide Web is driving demand for both the Oracle8i database and our applications,'' Larry Ellison, chief executive and chairman, said in a statement.
"We're beginning to see some of their new products, like CRM (customer relationship management software), take hold," said Rao. "They also showed tremendous improvement in operating expenses, as part of their cost savings plan."
At the company's annual meeting in November, Ellison iterated his notion that the company would cut $1billion from costs and begin selling its software through the Internet. He has said as much first in October.
"This quarter's 5.5 percentage points of pre-tax margin improvement is another installment payment marking substantial progress toward that goal," said Jeff Henley, Oracle chief financial officer.
Palfrey contends that their improving margin story continues to unfold, but that it was "still too early to tell if their new e-commerce initiative is paying off."