Oracle’s Profit Beats Estimates on Support Contracts

Oracle’s Profit Beats Estimates on Support Contracts

Dec. 17 (Bloomberg) -- Oracle Corp., the world’s second- largest software maker, reported profit that beat analysts’ estimates after customers renewed annual support contracts. The shares climbed 3.5 percent in late trading.

Second-quarter net income rose 13 percent to $1.46 billion, or 29 cents a share, from $1.3 billion, or 25 cents, a year earlier, Oracle said today in a statement. Excluding some costs, profit was 39 cents in the period, which ended Nov. 30. Analysts in a Bloomberg survey estimated 36 cents on average.

Chief Executive Officer Larry Ellison, 65, has sought more than $42 billion in acquisitions over the past five years. That’s increased the number of customers that sign annual contracts for product updates and support -- giving Oracle a more reliable source of revenue. While orders for new software remain slow, they came in at the high end of Oracle’s forecast.

“That seems like a nice outcome for them,” said Pat Walravens, an analyst at JMP Securities LLC in San Francisco. He expects the shares to perform in line with the market and doesn’t own them.

Including revenue from acquired companies, sales rose 3.3 percent to $5.87 billion. Analysts had estimated $5.7 billion.

Oracle, based in Redwood City, California, rose 81 cents to $23.69 in extended trading after the results were released. The shares, up 29 percent this year, closed at $22.88 today on the Nasdaq Stock Market.

Spending Recovery

Goldman Sachs Group Inc. expects global spending on software to rebound next year, growing 8 percent. That’s a faster recovery than information-technology spending in general, which will rise 4 percent in 2010, the firm estimates.

To maintain growth, Oracle has acquired 54 companies in the past five years, including the $10.3 billion takeover of PeopleSoft Inc. The spree helped Oracle more than double sales and expand beyond its dominant database software. The acquisitions also turned Oracle into a one-stop software market for business customers.

Oracle’s proposed $7.4 billion acquisition of Sun Microsystems Inc., announced in April, has been delayed by a European antitrust review. A ruling is scheduled by the end of January. Oracle said today it expects regulators to approve the deal without conditions next month.

“Oracle becomes a more important part of the information- technology landscape with every acquisition they make,” said Sarah Friar, an analyst with Goldman Sachs in San Francisco. She recommends buying the shares, which she doesn’t own. “They know how to execute.”

SAP Competition

Oracle has added programs that run a variety of tasks, from human-resources management to analyzing internal operations. The programs also target specific industries, such as utilities, retail and manufacturing. The new applications have pitted Oracle against Walldorf, Germany-based SAP AG, the world’s largest maker of business-management software.

Last year, Oracle acquired BEA Systems Inc., stepping up its challenge against International Business Machines Corp. in the market for so-called middleware -- software that helps different kinds of programs share information.

Only Microsoft Corp., the world’s largest software maker, offers as many categories of programs as Oracle.

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