Oracle's Quarter: Good, But Not Good Enough

Oracle’s fiscal third quarter was good - just not good enough, as customers are starting to squeeze more out of existing applications rather than buying new licenses.

After market close Wednesday, Oracle reported earnings (statement) of $1.34 billion, or 26 cents a share, on revenue of $5.35 billion. Excluding charges Oracle’s earnings were 30 cents a share. The results were in line with expectations, but new software license sales were light at $1.6 billion for the quarter ending Feb. 29. That revenue tally hit Oracle shares after hours.

New software license revenue was up 16 percent from a year ago, but Oracle had projected growth of 15 percent to 25 percent. The new license growth is a gauge of tech spending and indicates whether Oracle is growing wallet share among CIOs.

Oracle had been expected to weather any economic downturn, but with new license revenue at the lower end of the company’s targets the software giant’s resiliency is being questioned. Don’t cry for Oracle though–there’s a lot of maintenance revenue to milk in CEO Larry Ellison’s business model.

On a conference call, Oracle noted that customers “got cautious” at the end of the quarter. The company also projected fourth quarter earnings excluding charges of 43 cents a share to 44 cents a share. Revenue growth will be 14 percent to 18 percent in the fourth quarter. Some of that growth comes courtesy of the BEA acquisition, which will close in the fourth quarter.

Oracle’s fourth quarter outlook is mostly in line with Wall Street estimates.

Among the key figures:

• Total software revenue was $4.24 billion in the third quarter.
• On demand sales were $174 million, up from $167 million in the previous quarter.
• Services revenue was $1.1 billion in the third quarter, down slightly from the second quarter.
• Oracle ended the quarter with 80,219 employees.