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Oracle in the 'Q3 pink'

Oracle in the 'Q3 pink'

Oracle reported third-quarter results on Tuesday that exceeded both the software vendor's and analysts' predictions.

In third-quarter results for the period ended February, Oracle saw net income grow 35 percent over the year-ago quarter to US$1.03 billion, while revenue grew 27 percent to $4.41 billion. Earnings per share (EPS) rose 36 percent to $0.20.

Discounting the impact of recent acquisitions and other factors, Oracle's pro forma net income grew 30 percent to $1.3 billion compared with the third quarter of fiscal 2006, while pro forma revenue increased 26 percent to $4.45 billion, and pro forma EPS was up 31 percent to $0.25.

Overall software revenue grew 25 percent to $3.5 billion with new licence revenue from Oracle's database and middleware growing 17 percent, while new licence revenue from the vendor's applications rose 57 percent. Total revenue from services was $916 million, an increase of 36 percent compared to the year-ago quarter.

Oracle CEO Larry Ellison claimed his company's middleware business exceeds that of pure-play middleware player BEA Systems. "Not only are we growing faster than BEA, we're now larger than they are in the middleware business," he says in the release. Oracle is also hard at work trying to become the number-one business applications vendor as it competes with its bitter rival and the market leader SAP.

As Oracle continues aggressively acquiring new companies, what remains unclear is the growth in sales of application software licences excluding recent purchases. In other words, how well are the vendor's core applications selling? Although Oracle posted strong overall results back in December for its second quarter of fiscal 2007, analysts noted signs of weakness in the company's growth in relation to software licence revenue. Oracle missed its target for software revenue growth in the second quarter, blaming deals didn't close in time for the end of that financial period.

Analysts are also keen to find out how well Oracle's plan to offer full support for Red Hat's Enterprise Linux is progressing. Oracle announced the move last October but has yet to talk publicly about how many customers have opted for the offering.

At the start of this month, Oracle announced plans for another major acquisition, agreeing to buy business intelligence software vendor Hyperion Solutions for US$3.3 billion in cash. Subject to regulatory conditions, the deal is set to close next month.


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