Oracle blows away 2Q estimates

On Tuesday, Oracle reported second quarter earnings of $384m (£230m), or 26 cents a share, on sales of $2.3bn.

"It was obviously a terrific quarter," Oracle CFO Jeff Henley told analysts during a conference call. "We hope that it's going to be business as usual. We see a good pipeline for Q3, we've got our expenses under control."

First Call consensus expected the database software developer to earn 22 cents a share though so-called "whisper" estimates pegged it for a profit of 24 cents a share.

Oracle shares closed off 2 7/8 to 76 15/16 ahead of the earnings report but stormed up 5 1/16 to 82 in after-hours trading.

The $2.3bn in sales was only an 11 percent improvement from the year-ago quarter when it earned $274m, or 19 cents a share, on sales of $2.1bn. But Oracle's second quarter operating margin rose to 24.8 percent from 18.9 percent in the year-ago period.

Oracle executives said they saw lower costs in every division, although analysts during the conference call noted that consulting services provided much of the expense reduction. The company, which has previously said it plans to eventually cut $1bn in annual costs, still has plenty of room for cost cuts, said Larry Ellison, chairman and CEO.

In the quarter, software-licensing sales improved 18 percent from the year-ago quarter with database software sales jumping 17 percent to $651 million. Application software sales grew 31 percent to $168 million and services revenue increased 10 percent to $1.4 billion.

"We're the only ERP (enterprise resource planning) vendor in the world that's growing," Ellison said. "We see our ERP software being purchased alongside our CRM (customer relationship management) software, not separately from our CRM software."

All of Oracle's divisions look strong for the third quarter, executives said. "Pipelines are up beyond what we are expecting to grow, and we think that we have plenty of coverage on our forecast and our budget," said Ray Lane, Oracle's president. "We see it internationally, which is a big difference as well. We're now seeing pipelines grow worldwide."

Last quarter, Oracle met Street estimates, earning $237 million, or 16 cents a share, on sales of $2 billion but analysts were hoping for a little more on the top line.

Its shares have been on an incredible roll in the past six months, surging from a 52-week low of 21 in April to a 52-week high of 84 3/4 earlier this month.

"Six months ago we said that our goal was to save one billion dollars out of our annual cost structure within 18-24 months primarily by using our own Internet applications to transform ourselves into a global e-business internally," said CFO Jeff Henley in a prepared release. "This quarter's 5.5 percentage points of pre-tax margin improvement is another installment payment marking substantial progress toward that goal."

First Call consensus expects Oracle to earn 24 cents a share in its third quarter and $1.06 a share in the fiscal year.

Oracle shares split 3-for-2 in March.

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