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Oracle Sees Growth From Outsourcing

Oracle's financial reserves saw an infusion of cash from an outpouring of outsourcing contracts secured in the last three months, the company said.

The Redwood Shores, Calif.-based firm, which reported its fiscal third quarter financial statement Thursday, said at least seven new large-scale contracts helped contribute to its $2.5 billion in third quarter revenues and $635 million in net income. Oracle also said its earnings of 12-cents per share were in line with analysts expectations.

"Oracle's fiscal third quarter was another solid quarter, with new software license revenue growth of 12 percent, which is identical to last quarter," Oracle CFO and recently appointed chairman Jeff Henley said in a statement.

The company also said new software license sales were up 12 percent to $847 million, while software license updates and product support revenues were up 17 percent to $1.18 billion. Company CEO Larry Ellison said much of the success was attributed to Oracle's database business, but the company also saw major outsourcing contracts with organizations like the City of Memphis, Hardin-Simmons University, POM Wonderful, State of Ohio Attorney General, Symmetricom, The Manitowoc Company, and Whirlwind Steel Buildings.

Oracle uses its E-Business Suite as the keystone of its Outsourcing endeavors. The platform includes Oracle's enterprise resource planning (ERP) tools -- Human Resource Management and/or Financial Management Services -- as well as its traditional database products to help maintain, manage and upgrade a client's applications.

"This was a very strong quarter for our database business," Ellison said. "Overall, our database growth was 16 percent. Sales of the RAC option for our database increased 86 percent. This is very important because RAC is what customers buy when they're building database grids. Rapid RAC growth indicates rapid acceptance of Oracle10g's high-performance, high-reliability grid capabilities."

Henley followed up by reporting Oracle's operating cash flow in the first nine months of the fiscal year at $2.2 billion.

Analysts say Oracle's favorable financial statements will help hold back shareholders from balking at the company's $9.4 billion bid to purchase Pleasanton, Calif.-based PeopleSoft . Oracle said it has now spent in excess of $43.4 million in the last nine months pursuing the hostile takeover. The Department of Justice is seeking to stop the deal, citing anti-completive protection. On Wednesday, a federal judge for the U.S. District Court in San Francisco scheduled a trial for June 7, two weeks earlier than both Oracle and the DoJ anticipated.

"Given the assets of Oracle, they can keep this trial going for awhile, but it's really up to Oracle investors to say. Trials are messy and a distraction," Yankee Group senior analyst Mike Dominy told internetnews.com.

Dominy said recent SEC filings that show a nearly 20 percent slip in PeopleSoft's license revenue also aid Oracle's pursuit.

But Ellison reiterated that PeopleSoft is not the only company that the No. 2 software vendor has its sights set on.

"PeopleSoft was the first, and we hope to be successful there, there are a number of other acquisitions we are looking at," Ellison said in a conference call with investors. "We expect to be doing a lot more acquisitions in the future."

Oracle's stock finished trading Thursday down 16 cents to $12.25 per share.