Oracle Beats Estimates, Guides Lower - TheStreet

SAN FRANCISCO - In the face of market turmoil, Oracle (ORCL) - Get Report issued a cautious revenue guidance on Thursday for its second fiscal quarter.

The guidance after the company reported first-quarter earnings that exceeded Wall Street's expectations and included exceptional operating margin performance.

Oracle projected second-quarter revenue growth of 12% to 15% in constant currency, implying a top line of $6.01 billion to $6.17 billion, excluding special items. Analysts were anticipating revenue of $6.23 billion, according to Thomson Reuters.

Factoring in a negative three-point currency effect due to the recent strengthening of the dollar, revenue will grow from 9% to 12%, President and CFO Safra Catz said on the conference call. That implies revenue of $5.85 billion to $6.01 billion.

Deal-closure-rate assumptions used to make revenue projections are in line with historical rates, Catz said. August deal closings "were within our normal range of close rates." P/>Excluding special charges, second-quarter EPS will be 35 cents or 36 cents, assuming today's foreign exchange rates, Catz said. Analysts were looking for EPS, less charges, of 35 cents.

In the first quarter just ended, EPS was 29 cents, excluding special charges. Analysts were looking for 27 cents a share.

Net income grew 28% to $1.08 billion, or 21 cents a share, vs. $840 million, or 16 cents a share, in the year-ago period.

Excluding special charges, revenue at the Redwood Shores, Calif. software giant rose 18% to $5.42 billion, in line with analysts' estimates, from a top line of $4.59 billion in the same quarter of last year.

New license revenue grew 14% year over year, to $1.24 billion.

A trouble spot showed up in new license sales for application software, which fell 12% year over year to $331 million. Executives attributed the lower demand for applications to the category's unusually high growth rate of 65% a year ago.

Oracle's core database and middleware new-license sales were up 27% year over year to $906 million. Recently acquired middleware developer BEA Systems contributed $84 million during the quarter.

Deferred revenue rose 14% year over year to $5.017 billion.

Operating margin, excluding special items, was 40%, a 350-basis point improvement year over year, the highest first-quarter margin in the company's history, according to Catz.

CEO Larry Ellison attributed Oracle's improving margin performance to the benefits of bigger market share, particularly in database software. The margins are the result of "economies of scale. Our license renewal business, sometimes called software maintenance, is now half of our business," said Ellison.

Revenue in the closely watched American market rose 13% to $2.69 billion. In Europe, revenue grew 20% to $1.83 billion. Growth was fastest in Asia, at 30%, for revenue of $814 million.

Oracle competes with

IBM

(IBM) - Get Report

and

Microsoft

(MSFT) - Get Report

in database software. Its chief competitor in applications software is

SAP

(SAP) - Get Report

.

Orale shares were up 72 cents, or 3.8%, to $19.47 in after-hours trading.