Oracle Sees Weaker Third Quarter

Revenues, profits drop on sluggish software sales at database giant

Redwood Shores, CA  March 15, 2002  Software giant Oracle Corp. on Thursday reported slightly lower earning for its fiscal third quarter, compared to the year-ago period, and the company pointed to continued weakness in technology spending even as the broader economy is showing signs of improvement.

Oracle saw revenues of $2.2 billion and net income of $508 million for the third quarter ending February 28, compared to $2.7 billion and $583 million, respectively, for the year-ago period. Its third quarter earnings-per-share of $0.09 compared with $0.10 in the same period last year.

The company said its operating margin improved to 35 percent in the quarter, versus 33 percent the prior year. New software license sales were down 30 percent, while software license renewals grew 5 percent. Overall services revenues were down 7 percent, with support revenues flat with the prior year.

"While the overall economy may have begun its recovery, technology spending is lagging," said Oracle chief financial officer Jeff Henley. "In addition, certain industries such as telecommunications, financial services and high-tech manufacturing, where Oracle has been particularly strong, continue to be under stress. As a result, our sales to companies in these industries have slowed markedly compared to a year ago.

"As the recovery becomes more broad based, we expect technology spending to increase and our software sales to improve," Henley said.

Oracle CEO Larry Ellison said that while the company's products continue to sell well, the weak economy has kept pressure on price tags. "It's clear that tight IT budgets are making customers more price sensitive," Ellison said, adding, "Our aggressively priced products are actually selling quite well in this economic climate."

Ellison suggested that while customers have been purchasing the lower priced standard edition of the company's database solution, which saw a 14 percent increase in sales this quarter, many of those same customers would likely upgrade to the enterprise version of the package as the economy improves.

New customers for Oracle's e-business, database and application server products during the third quarter included AT&T, Chicago Transit Authority, Emerson, Guangzhou Metro and McGraw-Hill Education.