Oracle Delivers Some Holiday Cheer

Much to the dismay of its competitors, it’s becoming more and more apparent that Oracle’s relentless aggression is paying off.

On Wednesday, the software giant shattered analysts’ estimates in its second-quarter, posting a profit of $1.3 billion, or 25 cents a share, on sales of $5.3 billion. Excluding one-time items, it pocketed 31 cents a share.

Analysts were forecasting a profit of 27 cents a share on sales of $5.04 billion.

The upside surprise—which Oracle also provided in its previous quarter—not only buoyed investors’ spirits heading into the New Year, but provides a measure of validation to the company’s acquisition-happy strategy of recent years. In the past four years, Oracle has acquired 45 companies in its dogged pursuit of SAP for the top spot in the enterprise business application market.

Following the stellar second quarter results, analysts who have become accustomed to Oracle topping estimates by a penny or a two a share were quick heap praise on CEO Larry Ellison and company.

“Oracle was the first enterprise software vendor to embrace the fact that growth in enterprise software was slowing, and its aggressive consolidation strategy continues to pay off,” Peter Goldmacher, an analyst at Cowen & Co., said in an e-mail to late Wednesday afternoon. “Oracle can now sell a wider variety of products at a better price than anyone else, which is particularly compelling into a challenging macro environment.”

It was a familiar refrain. WR Hambrecht analyst Robert Stimson told Reuters that “the plan seems to be working. They beat me on every matrix, so they are to be credited.”

In the quarter, new software license sales soared up 38 percent from the year-ago quarter to $1.67 billion. Its license, update and support sales grew 24 percent to $2.49 billion and total services sales rose 22 percent to $1.15 billion.

During a conference call with analysts following the earnings release, Oracle CFO Safra Catz said demand for new software was the higher than it’s been in more than a decade, adding that the company expects license revenue from new software sales to shoot up between 15 percent and 25 percent in the third quarter.

“We are seeing more deals and each deal is a little bigger than in the past,” she said.

Another blowout quarter provided yet another platform for Oracle executives to take another swing at arch-rival SAP.

“In Q2 Oracle’s applications new license sales grew 63 percent compared to SAP’s new licenses sales growth rate of 15 percent in their most recent quarter,” Oracle President Charles Phillips said in a statement accompanying the financial results. “We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies.”

Oracle, which typically provides a rather subdued forecast for future quarters, told analysts to expect non-GAAP earnings of between 29 cents and 30 cents a share in the third quarter, at or slightly above the 29 cents most analysts had previously forecast.

Oracle shares rallied up $1.39 a share, or 7 percent, to $22.15 following the earnings report after closing off 49 cents, or 2 percent, to $20.76 in Wednesday’s regular trading session.

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