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Oracle Beats Analysts' Estimates

In a day that has left some hawkeyes holding their breath on the hot topic of Oracle Corp.'s second quarter earnings, the tech giant outdid analysts estimates by posting a net income of $623 million, or 11 cents per share.

Consensus estimates pegged the tech giant's net income at 10 cents per share. Oracle announced the positive news after the market closed Thursday, adding that the results dwarfed 1999's Q2 earnings by 62 percent -- last year at this time the giant notched $2.3 billion in revenue, $384 million in net income and 6 cents per share.

Other noteworthy figures found that the firm also scored big in its software segments, with applications software sales up 66 percent to $279 million and database software up 19 percent to $775 million.

Perhaps most significant, is the applications software growth, which blew away analysts' projected growth of 50 percent by 16 percent. Last quarter, the giant saw the stock dip when it reaped growth in that sector at only 45 percent, a full 15 percent below analyst's estimates.

Oracle Chief Executive Officer Larry Ellison made special note of this in a company statement Thursday:

"Our applications business is strong and getting stronger," Ellison said. "Oracle's new e-business suite puts every aspect of a business -- marketing, sales, service, procurement, supply chain, manufacturing, accounting, human resources -- everything, on the Internet. All the applications in our suite are designed and engineered to work together, so customers buying the entire suite don't need to do any systems integration."

Ellison also made no secret of his firm's positioning with its rivals, claiming that Oracle is winning more "best-of-breed battles against Ariba, I2, Seibel and other niche specialists" by swaying customers with its tight integration.

He boasted that when customers use one of his company's applications, they often go back for the entire suite.

"Systems integration is so complex and expensive that nobody really wants to do it," Ellison explained.

On the hardware side, Oracle also attacked IBM Corp. when it pointed to a study conducted by AMR Research, which found that customers are turning away IBM's DB2 database to snap up Oracle's pending Oracle9i Database. In rekindling the familiar server wars, Oracle noted that that 11 percent of DB2 customers surveyed plan to change their primary database over the next two years and out of those customers planning to switch, 70 percent plan to migrate to Oracle.

In a clear dig at rival IBM, Oracle indicated its product is better: "Perhaps it is because customers know only Oracle offers the industry's leading Internet database. Or maybe it is because only will bring performance and reliability to new levels through Real Application Clusters backed by powerful Cache Fusion technology."

What isn't a matter of debate is that Oracle is a bellwether for the market. Most analysts, from Merrill Lynch's Christopher Shilakes, to Lehman Bros.'s Neil Herman had estimated the titan's net income at 10 cents per share, or perhaps even a penny more.

While they were correct on the penny-more guess, MetaMarkets.com's Dave Nadig said before the release that few earnings announcements carry as much weight and gravity as Oracle and its ubiquitous skipper, especially after "blowing everybody away" last quarter.

Nadig said Oracle's coming up big would be sign of the company soundness in light of several key defections in the past six months, most notably that of former Executive Vice President Gary Bloom, who took the helm at the smaller Veritas Software in November. Ironically, he had taken over much of the duties of departed Chief Operations Officer Ray Lane, who left Oracle in July.



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