March 13, 1998 2:30 PM PST
Oracle up, leads Nasdaq trading
The database giant's stock rose as high as 31 before closing at 29-3/16, up 1-1/2. Oracle saw more than four times its normal trading volume, with nearly 44 million shares bought and sold.
The company posted third-quarter earnings that surpassed Wall Street's expectations yesterday, spurred by database sales in the Americas that helped bolster revenues.
That report stood in stark contrast to the previous quarter, during which Oracle fell far short of revenue-growth projections for its primary database and applications business, causing its stock to plummet 29 percent. The company at the time had cited market fallout from Asia's economic crisis, as well as delays in new products.
"This is definitely a positive surprise, but it's still too early to say the company is on the way back to its historical levels of growth," said Jim Pickrel, an analyst with Hambrecht & Quist. "Their applications business, which is their focus, is not keeping up with the market and this is where they need to prove themselves."
Oracle attributed its improved third-quarter results to its earlier strategy of restructuring its sales force to specialize in specific businesses, such as health care, finance, and energy. The strategy was still settling into place during the first and second quarters, which contributed to the revenue decline, the company said.
"The Americas license [revenue] recovery was significant," said Jeff Henley, chief financial officer. "I think, again, largely because of the reorganization impact that no longer plagued us in the third quarter."
Oracle CFO Jeff Henley on improved license revenues
But the company cautioned that weakness in Asia remains and will likely to continue through the year.
Oracle posted third-quarter net income of $215 million, or 22 cents a share, up from last year's reported $169.3 million, or 25 cents a share. Analysts had expected the company to post earnings of 19 cents a share, according to First Call.
Revenues rose 27 percent to $1.75 billion in the quarter, up from $1.37 billion the previous year.
Oracle's applications business saw its revenues increase to $139.7 million, up 29.6 percent from $108 million a year ago. The company had been posting fast growth in this area, reaching a 96 percent year-over-year growth in the first quarter, but it tumbled to 7 percent the next quarter. This latest quarter, although it shows improvement, does not match the level it had achieved in the early part of its fiscal year.
Oracle's server business rose 12.8 percent to $537 million for the quarter, compared with the previous year. This area of Oracle's business, which had low one-digit year-over-year growth in the past two quarters, marks a change from the first half of the fiscal year.
In January, chairman and chief executive Larry Ellison said Oracle's U.S. applications business was expected to grow by 50 percent, while its domestic database sales were anticipated to rise 25 percent. The company's server business in the Americas rose 34 percent, but applications rose only 35 percent in the regions.
The company's tools business, meanwhile, continued to decline. The database company generated $76.5 million in this arena, down 5.5 percent from a year ago.
In addition, the company's services business, which accounts for the largest portion of its overall revenues, grew 41 percent. This aspect of its business has been growing at steady clip of about 40 percent for the past several quarters in year-over-year comparisons.