Oracle Reports Q1 Drop In Database Sales

database software middleware

CEO Larry Ellison, in a conference call with financial analysts Wednesday, also took time to crow about the next-generation Exadata Database Machine the company unveiled Tuesday, citing it as proof of its technological prowess against the competition.

Oracle reported revenue of $5.05 billion for the fiscal first quarter ended Aug. 31, down 5 percent from $5.33 billion in the same period last year. But thanks to cost control efforts the software giant reported earnings of $1.12 billion, a 4 percent gain from $1.08 billion one year ago.

Oracle said sales of new software licenses were down 17 percent to $1.03 billion, an indication of how much customers have cut back on software purchases during the recession. But revenue from the vendor's customer base for software license updates and product support increased a healthy 11 percent to $3.12 billion. Services-related revenue was down 18 percent to $909 million.

New license sales of "technology" software -- Oracle's term for its middleware and database software -- were $711 million in the quarter, down 19 percent year-over-year, said chief financial officer Jeff Epstein in the conference call. New license sales of application software during the quarter were $317 million, unchanged from last year.

Sponsored post

Oracle executives said slower sales by OEMs and other companies that bundle Oracle's database software with their applications took a toll on database sales in the quarter.

Oracle said some of its financial results were also hurt by the stronger U.S. dollar against foreign currencies. The drop in revenue from new software license sales, for example, would have been only 14 percent without the impact of currency fluctuations. Revenues overall would have been 5 percent higher in the quarter without the currency fluctuations, Epstein said.

Sales in the second quarter are expected to range between flat and 3 percent growth compared to one year earlier, at current exchange rates, said co-president Safra Catz in the call.

Oracle executives were bullish on their competitive position. Co-president Charles Phillips said that Oracle gained market share against rival SAP in applications during the quarter. CEO Larry Ellison noted that new releases of Oracle's middleware and database products, in July and on September 1, respectively, strengthen Oracle's competitive stance against IBM in those markets.

The Oracle Middleware 11g release was particularly noteworthy because it pulled together a number of middleware products Oracle acquired through its BEA Systems acquisition. "All the technology we've acquired is now thoroughly integrated into a unified suite of middleware," Ellison said. "We think this gives us a huge advantage over our primary middleware competitor, which is IBM."

When the new Oracle Database 11g Release 2 is also considered: "We think we're well positioned to compete effectively against IBM in the software infrastructure market," he said.