Oracle: Sales Held Steady Despite Recession

Oracle reported Thursday that sales in the second quarter ended Nov. 30 increased 6 percent year-over-year to $5.6 billion. But net income dipped 1 percent to $1.3 billion. And new software license revenue, a key growth indicator, was down 3 percent to $1.6 billion.

Oracle executives said the strengthening of the U.S. dollar compared to foreign currencies took their toll on the company's sales and earnings numbers. Without the hit from currency fluctuations, sales growth would have been up 12 percent and net income up 10 percent, according to the company. Even new software license revenue would have ended in positive territory, up 5 percent.

In a conference call with Wall Street analysts, Oracle executives said sales of the company's database, middleware and application software sales remained steady.

Revenue from database and middleware software sales increased 12 percent in the quarter while new software license sales for those products were up 4 percent. But revenue from applications was flat year-to-year and new application software license sales declined a hefty 15 percent.

CEO Larry Ellison said sales of Oracle's Fusion middleware are particularly strong and are gaining market share against rival IBM. "We believe we are at least the same size as IBM in middleware and we may have even surpassed them," he said. Sales of Oracle's on-demand software are also growing, including its on-demand CRM applications that compete against Salesforce.com, Ellison said.

During the quarter, Oracle sold its first HP-Oracle Database Machine, the database appliance jointly developed with Hewlett-Packard that made its debut at Oracle OpenWorld in September. "That business looks very promising," Ellison said.

But Ellison also acknowledged that customers seem to be focusing their purchases on more limited IT projects that deliver quick returns on investment. "I think customers are signing up for fewer multiyear, multimillion-dollar contracts," he said.

For the current quarter Oracle is projecting revenue to grow between 8 percent and 11 percent in constant currency while new software license revenue will range from a decrease of 2 percent to a gain of 8 percent in constant currency.

Oracle Co-President Safra Katz said Oracle might take advantage of low stock valuations to make acquisitions, either of small software companies in specific vertical industries or possibly a bigger company. "We're very opportunistic," she said. "We're always shopping for things that make sense for us."