Oracle Reports Q2 Revenue Growth, But App Sales Slow


Oracle reported that sales overall increased 18 percent year-over-year in the quarter to $5.3 billion while net income rose 28 percent to $1.1 billion. Total software revenue was up 20 percent to $4.2 billion from the same period last year. New software license revenue, a key growth indicator, was up 14 percent to $1.2 billion.

Growth in database and middleware software sales was strong in the quarter, up 27 percent year-over-year to $906 million in the all-important area of new software license revenue. But new license revenue for Oracle's applications was down 12 percent from one year earlier to $331 million.

CEO Larry Ellison and co-presidents Safra Katz and Charles Phillips sought to reassure financial analysts in a teleconference that Oracle's business remains largely unaffected by the shaky economy. "Overall, we feel very good about where we sit," Katz said.

Ellison even bragged about the company's market share gains in the database and middleware arenas. In middleware, which recorded 35 percent sales growth in the quarter, Ellison said Oracle had surpassed IBM to become the top vendor or was about to.

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But several analysts on the call said they were seeing indications that IT spending by businesses was beginning to soften because of the sputtering economy.

When asked about the slower new license sales for applications, Katz noted those sales increased 65 percent in the first quarter last year, setting a high hurdle for this year's first quarter. "The truth is, our business has a lot of momentum," she said.

While Katz said she expects application sales to grow this year, she did not commit to year-over-year growth in the current (second) quarter. Katz, noting the current turbulence among financial services companies, also said that industry accounts for sales in the "low single digits" of Oracle's total revenue.

The Oracle executives also made the argument that when businesses cut IT spending, they tend to cut purchases from smaller vendors and continue spending with their core suppliers such as Oracle.