Oracle net profit jumps, but outlook cautious

By Jim Finkle

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.