Oracle Execs See First Hints Of IT Spending Turnaround

Oracle executives, speaking on the company's fourth-quarter/year-end earnings call Tuesday, said Oracle's sales pipelines grew during the quarter "rather significantly," in the words of Safra Catz, Oracle co-president. And there are early indications businesses may be loosening the IT-spending purse strings just a bit, Charles Phillips, Oracle's other co-president, said.

"In conversations back in January, February, people couldn't focus because they were so worried about the economic news," Phillips said on the call. "Even if they had budgets, they just didn't feel good about spending money back then. It doesn't feel that way anymore."

Phillips cited recent signs, including conversations he has had with CIOs in recent weeks, that attitudes may be changing and some customers may increase IT spending in the second half of the calendar year. He said the "sense of panic, the frozen deer-in-the-headlights feeling" seems to be dissipating. "But, nonetheless, everyone is still under cost pressures going forward," he said.

Pointing to growth in the company's sales pipeline, Phillips said: "That may be an indication of people getting back to work, but it's hard to call."

Oracle, nevertheless, reported decreases in both sales and earnings in its fourth quarter ended May 31. But company executives said its fourth-quarter and year-end results were impacted by the reduced value of foreign currencies compared to the U.S. dollar. Oracle reported sales of nearly $6.9 billion for the fourth quarter, a drop of 5 percent from the $7.2 billion in sales the company reported for the same period one year ago. Net income was almost $1.9 billion, down 7 percent from more than $2 billion in earnings one year earlier.

The currency fluctuations reduced total revenue by 8 percent and net income by 11 percent, said CFO Jeff Epstein, during the call.

For fiscal 2009 ended May 31, Oracle reported sales of nearly $23.3 billion, a 4 percent increase from more than $22.4 billion in sales the company reported for fiscal 2008. Net income for the year was almost $5.6 billion, up 1 percent from more than $5.5 billion in earnings in the previous year.

In the fourth-quarter, revenue from new software license sales, a key indicator of new business, was down 13 percent to $2.7 billion, compared to $3.1 billion one year earlier. But Oracle said new license revenue was reduced by 9 percent because of the currency fluctuations. Revenue from annual fees customers pay for software license updates and product support grew 8 percent in the fourth quarter to $3.1 billion from $2.8 billion last year.

For the current quarter, Oracle is forecasting that total revenue will grow between 1 percent and 4 percent, based on constant currencies.

The forecasts did not include any impact from Oracle's pending $7.4 billion acquisition of Sun Microsystems, which Catz said the company expects to complete this quarter.

Oracle executives also took the opportunity of the earnings call to brag a bit about the success they said they are having against competitors, including data warehouse technology vendors such as Teradata and Netezza, with the Oracle Exadata database server, and against archrival SAP with Oracle's application products. "We grew faster than SAP in every region around the world, including in its home base of Europe," Catz said.

Phillips said Oracle's Fusion middleware has been a particularly strong seller this year. That's likely to get a boost next week when the company debuts the next generation of the product line, Oracle Fusion Middleware 11g.

And CEO Larry Ellison said Oracle has developed the code for its next-generation Fusion line of applications and they are now being tested by customers. He said they will be formally announced later this year and will be available in 2010.