Oracle net profit jumps, but outlook cautious

BOSTON (Reuters) - Oracle Corp (ORCL.O) reported a 27 percent rise in quarterly profit as sales of new software beat expectations, but the company gave a cautious outlook citing economic uncertainties, and its shares fell 3 percent.

Oracle, whose shares had been near a seven-year high, posted May quarter results that topped Wall Street estimates on virtually all measures. But the company cautioned that while business is growing, deals are taking longer to close than they have historically as customers are giving them more scrutiny.

"Bit more cautious environment. But ... we have a big enough pipeline hopefully to get through it all," Oracle President Charles Phillips said on a conference call.

Oracle gave forecasts for its fiscal first quarter, ending in August, roughly in line with expectations. It saw revenue growing 18 percent to 20 percent, net income at 17 to 18 cents per share, and earnings excluding items at 26 to 27 cents.

Analysts, on average, were looking for earnings excluding items of 27 cents per share, according to Reuters Estimates.

Pacific Crest Securities analyst Brendan Barnicle said Oracle's commentary on business trends suggested some caution about the economy. He said smaller software maker Red Hat Inc (RHT.N) exhibited a similar tone in its report on Wednesday.

"I think companies are going to continue to be cautious about their guidance that they give moving into summer," Barnicle said.

Chief Financial Officer Safra Catz said the August quarter faced tough comparisons with a year ago, when software license growth had jumped 35 percent from the year-earlier period.

"We can't predict the economy from one quarter to the next," Catz said.

Goldman Sachs analyst Sarah Friar said Oracle's report was strong but some investors were cashing in profits after the stock hit a seven-year high of $23.57 on June 3. The shares fell to $21.80 in after-hours trade.

A TIME TO INVEST

Friar, noting the selling by short-term investors, saw few catalysts for buying the stock over the next few months, but she believes it could rise 20 percent over the next year.

"There are times to be a trader and there are times to invest," she said. "Oracle is a stock I want to invest in."

Friar and other analysts said there was plenty to be happy about in Oracle's results for the fiscal fourth quarter, which ended on May 31 and tends to be its strongest every year.

Net income rose to $2.04 billion, or 39 cents per share, from $1.60 billion, or 31 cents, a year earlier. Profit excluding items was 47 cents a share, beating the average analyst target of 44 cents.

Oracle, led by billionaire Larry Ellison, said sales of new software licenses climbed 27 percent to $3.14 billion.

New software licenses are a key indicator for software makers because customers also sign maintenance contracts that typically cost 20 percent of the product price per year. Customers may also expand the number of workers using a program that they have already purchased.

Adjusted revenue rose 24 percent to $7.28 billion, topping Wall Street's forecast of $6.93 billion.

Growth accelerated in the United States, with new software sales up 22 percent versus 15 percent in the prior quarter -- a performance analysts said was solid given the weak economy.

"These are strong results and evidence that Oracle's hard-charging sales culture and ever more diversified product line-up is paying off," Edward Jones analyst Andy Meidler said. "We think that software in particular is an area that should see strength, given its productivity enhancing ability."

In its earnings release Oracle did not disclose the impact its April purchase of BEA Systems had on results. Some analysts said they wish it had broken that out to make clear how much of the earnings surprise was due to the acquisition.

New license sales of Oracle's business management software, which competes with SAP AG (SAPG.DE), bounced back after a weak third quarter, jumping 36 percent versus a year earlier.

David Garrity, director of research at Dinosaur Research, said no one expected the results to be as strong as they were. "Larry is just going to have to buy a bigger boat," he added.

(Additional reporting by Eric Auchard and Duncan Martell in San Francisco; Editing by Jeffrey Benkoe and Braden Reddall)