Oracle's Shopping Spree Bears Fruit

The software giant reported strong revenue growth Sept. 19 as recent acquisitions appear to be paying off

Oracle (ORCL) CEO Larry Ellison late Sept. 19 announced surging revenue and income during the three months ended in August, surprising Wall Street players who had underestimated the success of his recent acquisitions.

The Redwood (Calif.)-based software company said it had earnings per share (EPS) of 13 cents during the quarter, compared to 10 cents EPS during the same period last year. Revenues gained 30% to $3.6 billion, while quarterly net income rose 29% to $670 million. The results reflected gains in Oracle's business lines selling computer databases and applications, the software programs used to run information technology operations.

"We exceeded our guidance on every metric and delivered strong revenue growth across all product lines and geographies," said Oracle President and Chief Financial Officer, Safra Catz, in a press release. She noted that the company is now in year three of its five year plan targeting EPS growth at 20% per year.

The news added to optimism on Wall Street after Oracle had also reported a strong quarter three months earlier. Oracle has expanded its line of products by spending many billions on recent acquisitions, such as the software companies PeopleSoft and Siebel Systems.

Oracle's stock surged 11.3% to $17.95 per share in early trading Sept. 20 on the Nasdaq Market.

Analysts hiked their earnings estimates and price targets on the stock; Friedman Billings Ramsey, for example, hiked its twelve-month price target from $17 to $20.

"We believe that Oracles's acquisition strategy is paying off, as we are seeing the application business not only stabilize but improve," Friedman Billings Ramsey analyst David Hilal commented in a research note.

The company's applications licenses exploded 80% year over year to $228 million. Hilal thinks the improvement in Oracle's application business shows that customers are getting more comfortable with Oracle's product offerings. Meanwhile Oracle is "still in the early stages of reaping the benefits" of cross-selling its mix of products, Hilal wrote.

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