BEA says profit up as backs decision to reject Oracle

BOSTON (Reuters) - BEA Systems Inc BEAS.O posted a better-than-expected 59 percent rise in quarterly net profit as margins improved, and the business software maker said the results validated its decision to reject a takeover bid from Oracle Corp (ORCL.O).

BEA, under pressure from its biggest shareholder Carl Icahn to put itself up for sale through an auction, also gave an outlook that was above market expectations.

But its shares were largely unchanged following the results, after falling 4 percent earlier in the day to $16.70, because Oracle Chief Executive Larry Ellison had made it clear he would not raise his $17-per-share bid for BEA.

"You've got to give them credit for a good quarter," said WR Hambrecht analyst Robert Stimson. "The question for investors is, is this a one-time event or is this a trend for the next four quarters?"

BEA reported net income of $56.0 million, or 13 cents per share, for its fiscal third quarter ended October 31, up from 35.1 million, or 8 cents per share, a year ago.

Excluding items, profit was 19 cents per share, beating the 14 cents forecast by Wall Street according to Reuters Estimates. Revenue rose 11 percent to $384.4 million, compared to the average analyst forecast of $375.4 million.

BEA said its operating margin rose to 25 percent from 21 percent a year earlier.

Software sales, however, fell 1 percent to $134.8 million, offset by an 18 percent rise in services revenue to $249.6 million.

"When you value BEA its very important to consider our growth prospects," Chief Executive Alfred Chuang told investors on a conference call.

He reiterated that BEA was worth at least $21 a share, or $8.2 billion in total. Last month, BEA rejected Oracle's $6.7 billion bid and said the reason would become clear once it released its financial results.

Chuang said sales of newer products are poised to accelerate, and BEA is expanding in new markets and its distribution is growing.

OUTLOOK

BEA, which makes software called middleware that helps computers work together, said it expects to report fiscal fourth-quarter revenue of $420 million to $434 million, which is higher than the $417 million forecast by Wall Street, according to Reuters Estimates.

It said it expects profit excluding items of 70 cents per share for its fiscal year ending Jan 31, 2008, if it hits the midpoint of its revenue forecast for the fourth quarter.

Analysts were expecting the company to report full year profit of 54 cents, according to Reuters Estimates.

It was not immediately clear whether the results and outlook would satisfy billionaire investor Carl Icahn, who has threatened a lawsuit and proxy battle for control of the software maker if it does not put itself up for sale.

Icahn signed a non-disclosure agreement that gave him access to look at BEA's books prior to Thursday's results, but he has not publicly commented on his intentions since then. He could not be reached for comment.

"We delivered a solid quarter despite the distractions," Chuang said during the conference call.

BEA also said it planned to hold a shareholders meeting on February 14, after restating its earnings from 2003 to 2006 following the completion of an investigation into historical options grants,

(Additional reporting by Megan Davies and Dane Hamilton)