Oracle Tops Estimates as Companies Buy Databases in Cloud Push

Oracle Corp. (ORCL), the world’s top supplier of database software, posted third-quarter profit that topped analysts’ estimates as companies stepped up spending on programs they need to organize data and handle business tasks.

Profit excluding acquisition costs and some other expenses was 54 cents a share in the fiscal third quarter, which ended Feb. 28, Redwood City, California-based Oracle said in a statement today. That topped the 50-cent average estimate of analysts surveyed by Bloomberg. Oracle also raised its dividend.

Companies are bulking up on software and hardware that will help them cater to customers expanding in computing via the Internet, through the so-called cloud. That benefits Oracle, which added server machines that help run corporate networks through its acquisition of Sun Microsystems Inc. last year.

“They’re the No. 1 database supplier and any time there’s a new IT initiative, it starts with a database,” Yun Kim, an analyst at Gleacher & Co. in New York, said in an interview. “They can more than offset any disruption in Japan.” Kim has a “buy” rating on the shares and doesn’t own them.

New software license sales, a predictor of future revenue, rose 29 percent to $2.21 billion, bolstered by favorable currency exchange rates. That’s higher than the $1.98 billion estimate of Jason Maynard, an analyst at Wells Fargo Securities.

Sales rose 37 percent to $8.76 billion. Net income was $2.12 billion, or 41 cents a share, compared with $1.19 billion, or 23 cents a share, a year earlier.

Oracle rose 73 cents to $32.14 at 4 p.m. New York time in Nasdaq Stock Market trading.

Integrating

Chief Executive Officer Larry Ellison is doing a better job than many expected in integrating the company’s acquisition of Sun by focusing on profitable, high-end hardware that runs Oracle software, Maynard said. That’s allowing Ellison to make headway on his projection that the purchase will boost fiscal 2011 operating profit by $1.5 billion.

“They’ve done a remarkably good job at executing and not having any major missteps,” he said. “What’s made them loved among investors is they don’t make mistakes. A lot of other companies get easily distracted.”

Oracle is in the process of releasing new versions of its business applications developed under a project known as Fusion.

Results for this quarter may be affected by the earthquake and resulting tsunami in Japan, analysts said. Oracle Japan represented 5 percent of total sales last fiscal year, or about $1.35 billion, said Patrick Walravens, an analyst at JMP Securities, citing filings. Based on that, Walravens expects $157 million in sales may be at risk in the fourth quarter.

Spat With Hewlett-Packard

Oracle said this week it would halt software development on Intel Corp. (INTC)’s Itanium server chip. The move could affect sales of servers that use Itanium sold by Hewlett-Packard Co. (HPQ), the biggest customer of the chip. Hewlett-Packard and Oracle are increasingly competing in the burgeoning market for data centers, or large rooms of servers that deliver software and information globally.

Hewlett-Packard has termed Oracle’s plan a “shameless gambit” that jeopardizes customers and will hundreds of millions of dollars in productivity. Oracle claims that Intel plans to stop making the chip, an assertion that Intel denies, and has accused Hewlett-Packard of “knowingly withholding this information” from customers.

Under Ellison, Oracle has spent more than $42 billion on acquisitions since the beginning of 2005.

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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