Oracle's Earnings: Summer Doldrums Set In

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The first quarter of Oracle's fiscal year is historically a slow one, as the company bears the brunt of the summer months when customers, especially in Europe, curtail buying. Many other technology companies include September in their summer quarter, which softens the blow. Compounding the weakness, Oracle begins its fiscal year in the summer, so any new-year changes to its sales organization can affect productivity at an already slower-than-usual period.

During the call with analysts, Oracle executives said results were hurt by a stronger dollar, which erodes the value of overseas sales when they're translated into the U.S. currency. Oracle earned 22¢ per share when measured according to Generally Accepted Accounting Principles (GAAP), a penny higher than one year ago. New software license sales, a key indicator of future revenue, fell 17%, to $1.03 billion. Sales of new database and middleware licenses tumbled 21.5%, and new application license sales fell 4%. But software maintenance revenues, a highly profitable portion of Oracle's business that includes technical support contracts, increased 6%, to $3.1 billion.

Planning for Sun Integration

Oracle issued a more positive outlook for the second quarter that ends in November. Co-President Safra Catz said revenues would range from unchanged to 3% higher, and the company would earn 26¢ or 27¢ per share on a GAAP basis, vs. 25¢ per share a year earlier. Wall Street analysts had expected about 1% sales growth in the second quarter.

As it moves into the brisker fall sales season, Oracle continues to plan its integration with Sun. The new database server the companies announced is "a perfect example of what we can do together," said Catz. "We continue to do what we can at arm's length."

Oracle has acquired 56 companies in the past five years for $30 billion, doubling its revenues. As it looks ahead to its next megadeal, Oracle hopes that a dry summer doesn't turn into a chilly fall.

Ricadela is a writer for BusinessWeek in Silicon Valley.

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