Oracle Reports 26% Sales Growth In Q1

Oracle's first fiscal quarter is traditionally its weakest. But the giant software maker broke with tradition Thursday, announcing that revenue grew 26 percent year-over-year to $4.5 billion in the three-month period ended Aug. 31. Net income grew 25 percent to $840 million.

The quarterly results were fueled by a 26 percent increase in software revenue to $3.5 billion and a 35 percent surge in new software license sales -- a key growth indicator -- to $1.1 billion.

"The strength in the quarter was very broad based and across all product lines," said Safra Katz, Oracle co-president and CFO, in a conference call with Wall Street analysts.

Application new license sales posted 65 percent growth, the company reported. Investment banker UBS, in a report issued before Oracle's earnings, said Oracle and its competitors appear to be in the middle of a "widespread ERP [application] refresh cycle." UBS also said it has heard from Oracle partners and customers that its Applications Unlimited program, which guarantees continued support for JD Edwards, PeopleSoft, Siebel and Oracle E-Business Suite software after Oracle debuts its next-generation Fusion applications, is encouraging customers to continue buying the older products.

New license sales of Oracle's database and middleware products increased 23 percent during the quarter. Oracle began shipping Oracle Database 11g, a major upgrade of its flagship product, in July. But because existing Oracle database customers receive the new release as part of their maintenance contracts, CEO Larry Ellison said on the conference call that Database 11g will fuel steady growth rather than cause a quick spike in sales.

Hyperion, which Oracle acquired in April, contributed $80 million in sales in the quarter. Service revenue increased 25 percent to $1.1 billion.

Ellison reiterated the company's goal to be the number-one vendor in database, middleware and application software. While Oracle leads IBM and Microsoft in databases, Ellison conceded the company is behind those vendors in middleware and second to SAP in applications. But he maintained Oracle is growing faster than its competitors. "If we maintain our trajectory and IBM maintains their trajectory, we could pass them as early as the end of this year or certainly next year to be the number-two player in middleware," Ellison said.

Oracle is projecting that revenue in the current quarter will grow between 19 and 21 percent, fueled by expected new license revenue growth between 15 and 25 percent, Katz said. "Pipelines are extremely strong," she said of projected sales for the second quarter.

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