Oracle Shares Plunge on 3Q Sales Miss, Disappointing Forecast, Despite 30 Percent Profit Rise

Oracle shares fell more than 8 percent in after-hours trading Wednesday after the Redwood Shores-based company reported fiscal third-quarter profits that rose 30 percent and matched Wall Street's estimates _ but sales that fell well below analysts' projections.

Oracle said after the market closed that it rang up $5.35 billion in sales during the three months ended Feb. 29. That represents a 21 percent jump over the year-ago period but was still short of analysts' forecast for $5.42 billion in sales.

Oracle earned $1.34 billion, or 26 cents per share, in the latest quarter, compared with $1.03 billion, or 20 cents per share, in the year-ago period.

Stripping out one-time expenses, the company's net income was 30 cents per share, meeting the average estimate of analysts polled by Thomson Financial.

Many investors interpreted the sales miss as a sign Oracle is more vulnerable than they had thought to weakness in the U.S. economy, which has caused some companies to pull back in their spending on new technologies.

Oracle's chief financial officer, Safra Catz, said some customers "got a little more cautious" about their spending during the third quarter and said that was part of the reason the company is being cautious in its fourth-quarter guidance.

"Deals are getting done, although they took a little longer than anticipated later in the quarter," Catz said.

Oracle shares fell $1.74 to $19.20 in heavy after-hours trading, when the price swung as low as $19. The shares had fallen 14 cents during regular trading Wednesday to close at $20.94 before the financial results were reported.

Oracle, which makes database software for businesses, has spent about $35 billion over the past three years snapping up dozens of smaller competitors.

Oracle's latest acquisition is the $8.5 billion takeover of rival BEA Systems Inc., a deal that culminated in January after several months of acrimony but has yet to be finalized.

Even if the acquisitions haven't shielded Oracle from broader market forces, and investors might have liked a brighter forecast, the company's profit and sales guidance for the fourth quarter both fall within the range of what analysts were expecting.

Oracle expects net income of 43 cents or 44 cents per share in the fourth quarter, excluding one-time charges, and expects sales to increase 15 percent to 19 percent.

Investors were also disappointed with Oracle's fourth-quarter outlook for sales of new software licenses, which are important because they open the door for Oracle to sell product upgrades and maintenance services to the same customers later.

In the third quarter, software sales jumped 21 percent to $4.2 billion, with new software license revenues up 16 percent to $1.6 billion.

In the fourth quarter, sales of new software licenses are expected to grow between 10 percent and 20 percent over last year.

There could be "quite a bit of upside, but we want to be cautious," Catz said.

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