Updated from June 15

Helped by robust database sales,

Oracle

(ORCL) - Get Report

grew fourth-quarter revenue by 9% and beat Wall Street's earnings expectations by a penny, the database giant announced after the closing bell on Tuesday.

First-quarter guidance was in line with expectations, but sales of business applications were down. The earnings upside, due largely to a lower tax rate, was smaller than some investors had hoped. As a result, the stock started to slip on the news, recently down 46 cents, or 4%, to $11.25.

"We think investors have little to look forward to heading into ORCL's seasonally weak first quarter -- the time for ORCL to shine was in the

fourth quarter, and in line results are unlikely to act as a catalyst for the shares, in our view," Prudential analyst Brent Thill wrote Wednesday morning. (Prudential does not have a current investment banking relationship with Oracle.)

According to generally accepted accounting principles, Oracle's net income increased year over year by 15% to $990 million, or 19 cents a share, on revenue of $3.1 billion. Analysts polled by Thomson First Call were expecting a profit of 18 cents a share on sales of $3.1 billion. Fourth-quarter operating margin was a record 46%.

New software license revenue, a key indicator of new business, increased 10.6% to $1.313 billion, close to the high end of guidance the company issued in March. New database revenue increased by 15% year over year to $1.08 billion, the third quarter in a row Oracle has added new revenue to its most significant product segment. Overall database revenue grew by 12.8% to $2.373 billion.

New application revenue, however, dropped 6.1% to $231 million in the May quarter, while total application-related revenue was off 3.6% to $703 million. Analysts disagree about the importance of application revenue to Oracle. Some argue that it is too small a revenue stream to determine the fortunes of such a large company; others argue that because the database market is relatively mature, applications speak to the future.

Analyst Tony Ursillo of Loomis Sayles & Co. believes it is a mistake for investors to focus on the application business. Overall, "Oracle delivered a strong quarter," he said, noting that strong license sales in the quarter will translate into a continuing subscription revenue stream in the future. CEO Larry Ellison argued the same thing during a call with analysts after the announcement. (Loomis Sayles has a long position in Oracle.)

"License renewals are our largest focus. It is an extremely high margin business," Ellison said, pegging the margin at a lofty 80% to 90%.

Asked on a conference call why the application business is slumping, neither Ellison nor Chairman and CFO Jeff Henley had a direct answer, only saying that the sales environment is difficult and that the application business is less predictable than the database business.

In any case, Oracle hopes to expand its application revenue by buying

PeopleSoft

(PSFT)

, a leader in enterprise applications. PeopleSoft's board has repeatedly rejected Oracle's offer, most recently pegged at $21 a share, or $7.7 billion. The Department of Justice has sued Oracle over the takeover attempt, claiming it would unfairly restrict competition at the high end of the software market.

The suit is currently being heard in federal court. "We're confident that we are going to win," Ellison said during the call.

The company said that sales of so-called RAC server databases (a high-end version of the database) grew approximately 60% year over year, and, without giving details, mentioned that a relatively low-end database product designed to compete with

Microsoft

(MSFT) - Get Report

is selling strongly.

The application server business grew by about 15%, the company said.

Henley sounded upbeat during the call. "Operating income was $1.4 billion in the fourth quarter and $3.9 billion for the full year. That's the best operating profit we've ever delivered -- even better than our best year during the Internet bubble. We had a very strong finish to a very good year."

The company expects to continue its program of share buybacks, but conservatively. "The best use of cash is to grow our business

through acquisitions; whatever is left over will be used for buybacks," Henley said.

Looking forward to the August, or first fiscal quarter, the company expects to earn a profit of 9 cents a share on sales ranging from $2.15 billion to $2.21 billion, a growth rate of 6% to 9%. Analysts were expecting an EPS of 9 cents and revenue of $2.25 billion.