Earnings Reports for Sept. 14

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Oracle Beats Expectations

Oracle, the world’s biggest database softwaremaker, posted first quarter profits today that beat Wall Street estimates, on improved margins and strength insales of a new suite of software that moves business operations to the Internet.

The Redwood Shores, Calif.-based company also announced atwo-for-one stock split, which will entitle each stockholder ofrecord on Sept. 25 to receive an additional share for every shareowned.

First quarter net income rose 111 percent to $501 million, or17 cents per share, compared with net income of $237 million, or8 cents per share a year earlier. Sales rose to $2.3 billion from$2.0 billion, meeting analyst expectations for revenue.

Analysts on average had expected Oracle to earn 13 cents ashare, according to First Call/Thomson Financial, which trackssuch Wall Street estimates.

“They were good strong numbers, in the range of what wasexpected,” said Gregg Speicher, analyst with Hoak BreedloveWesneski & Co. “But yet there may have been a wide range ofexpectations, with some expecting even stronger numbers outthere. It’s hard to tell what the stock will do in the nearterm.”

Executives said in a conference call that sales ofapplications software, which includes its new 11i software tomove company operations online, were not as high as they wouldhave liked, but that they would get stronger in the secondquarter.

“We came out with 11i [the Oracle 11i e-business suite] atthe end of the fourth quarter,” said Chairman and Chief ExecutiveLarry Ellison in the conference call, adding that the new suiteof software did not come in as high as expected. “Selling thesuite is a large complex sale.”

He forecast that sales of the new software would “bespectacular” in the second quarter.

The company reported after the close of trade. Shares closedup $3-1/8 at $84-15/16, and shot up in after hours trade to $87after the report, within striking distance of a year-high of92-15/16. Shares then fell below the closing price to about$82-3/4, according the Island electronic trading system.

The company has beaten Wall Street profit expectations forthe past three quarters, and Chief Financial Officer Jeff Henleytold Reuters he expected to meet or beat second quarter estimatesas well. Consensus analyst estimates for the second quarter arefor share earnings of 19 cents, compared with prior-year actualshare earnings of 13 cents.

“There is no reason that with good margin improvement andlicense growth that we couldn’t do that (meet estimates) orhopefully better,” he said in a telephone interview. However, hecautioned analysts on a conference call, saying “that doesn’tmean everyone should hike their models.”

He said he expected continued operating margin improvementsto come from an ongoing efficiency plan, in which the companyhopes to cut expenses by $1 billion per year.

First quarter operating margins were improved over the yearearlier by 11.7 percentage points, to 29.1 percent from 17.4percent.

Sales of application software, which includes programmes thathelp automate payroll, human resources and accounting functionsat big companies, increased 42 percent to $156 million. Analystshad a wide range of expectations for application software sales,due to the wild card of a new product offering. One analyst putthe consensus near 60 percent.

Database software sales rose by 32 percent to $585 million,beating analyst expectations of 25 percent growth.

Total software license revenue was up 28 percent to $807million. License growth, or sales of new software, is watchedclosely by analysts and investors to gauge future profit growth.

Analysts said they were watching the quarter closely for anysigns of trouble resulting from the abrupt departure of ChiefOperating Officer Ray Lane, announced in late June. Ellisonassumed his duties.

It also came to light during the quarter that Oracle hadhired a private detective agency to investigate allies ofMicrosoft Corp., the world’s biggest software firm.

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Nike Just Does ItAs the Olympics opens with one of thebiggest advertising blitzes in Nike history, the athletic shoemakerreported first quarter profits of $210 million, beating Wall Streetexpectations.

The earnings of 77 cents per share compare with $200 million, or70 cents per share in the year-ago quarter.

Analysts surveyed for First Call/Thomson Financial had peggedearnings at 74 cents per share.

Sales for the quarter rose 5 percent to $2.6 billion, from $2.5billion in the same period last year.

“We’re off to a good start for the fiscal year,” said Nikechairman Phil Knight, who just returned from Australia inpreparation for the annual shareholders’ meeting Monday.

Asia and South America showed the strongest growth whileEuropean sales remained strong, but shoe sales declined again inthe United States, falling 1 percent to $935 billion. Domesticclothing sales also were off 2 percent to $326 million.

The most worrisome trend, to which Knight devoted most of hisopening remarks in a telephone conference with analysts, was flatorders for its shoes, clothing and equipment.

“I think that the Wall Street estimate on futures was thatthey’d be up somewhere between 2 and 6 percent,” Knight said, “soI was more disappointed than anybody when those numbers came in andthey didn’t fall within that range.”