Oracle: Strong second quarter; Outlook in line; BEA book closed

Oracle on Thursday reported fiscal second quarter net income of $1.3 billion, or 25 cents a share, on revenue of $5.3 billion, up 28 percent from a year ago. Excluding charges, Oracle earned 31 cents a share to handily top Wall Street estimates.

According to Thomson Financial Oracle was expected to report earnings of 27 cents a share on revenue of $5 billion for the quarter ending Nov. 30.

Overall, the quarter was strong. Oracle's software license revenue was up 35 percent, the best showing in 10 years. Oracle CFO Safra Catz noted in a statement that the company exceeded its "best case forecast."

As for guidance, Catz's projections on an earnings conference call were in line with expectations for the third quarter. Catz said third quarter software revenue will be up 15 percent to 25 percent. Total revenue will be up 21 percent to 24 percent under generally accepted accounting principles. Non-GAAP earnings will be 29 cents a share to 39 cents a share. Wall Street is expecting earnings of 29 cents a share. Under GAAP, Oracle's third quarter earnings will be 23 cents to 25 cents a share.

Catz did note that Oracle was benefiting from the weak dollar, but added that the company is diversified enough to weather a downturn in some verticals like financial services. "We read the same newspapers you do and we take that into account when projecting our business," said Catz on the call. "We have a broad highly diversified customer base" The hint: Oracle is being conservative. For good measure, Oracle noted some key customer wins among banks.

Regarding the BEA proposed acquisition during the quarter, Catz said Oracle has talked to BEA's investment bankers and concluded no friendly deal will be closed under current management.

Naturally, Oracle took jabs at SAP's new license sales growth on the ERP side of the house and IBM on the database side. On the conference call, CEO Larry Ellison reiterated Oracle's intent to focus on large companies and sell vertical specific applications. He said SAP's plan to chase the SMB market won't work since there's no leverage. Ellison said the company was winning ERP deals in hot verticals such as telecommunications, which are operating on dated legacy systems.

Oracle also claimed that it has won 65 deals in head-to-head competition with SAP.

By the numbers, which indicate Oracle benefited from a weak dollar:

• New software license revenue was $1.67 billion, up38 percent from a year ago. In constant currency Oracle's growth rate was 31 percent.
• Software license, update and product support revenue for the quarter was $2.49 billion, up 24 percent. Constant currency growth rate was 18 percent.
• Services revenue was $1.15 billion, up 22 percent from a year ago. Constant currency growth rate was 15 percent.
• Applications revenue was $1.48 billion with database and middleware coming in at $2.67 billion.
• On demand revenue in the quarter was $167 million.
• Revenue in the Americas was $2.67 billion with Europe, Middle East and Africa at $1.86 billion. Asia Pacific revenue was $774 million.
• Oracle ended the quarter with 79,649 employees with the bulk of those folks in Asia Pacific and the Americas.