Wild dollar fluctuations distort Oracle's profit

By Michael Liedtke  |   2008-12-20  |     NEWSPAPER EDITION

ORACLE Corp's quarterly profit slipped for the first time in three years as a stronger dollar hobbled its international sales, but the business software maker reassured investors by predicting it should still thrive despite the deepening recession.

The optimistic guidance offered late on Thursday eclipsed any concerns raised by Oracle's fiscal second-quarter results, which were distorted by wild currency fluctuations driven by the biggest financial crisis since the Great Depression of the 1930s.

Oracle shares gained more than 3 percent in extended trading as investors digested the developments.

The Redwood Shores, California-based company, said it earned US$1.3 billion, or 25 US cents a share, in the three months ended in November. The net income dipped by US$7 million from the same time last year while the earnings a share remained the same.

Although it was negligible, the erosion marked Oracle's first decline in profit since its fiscal quarter ending in November 2005.

Investors, though, focus primarily on how Oracle would have fared if it didn't have to account for expenses covering employee stock compensation and its acquisition spree of the past four years.

Excluding those factors, Oracle said it would have earned 34 cents a share -- matching the average estimate among analysts polled by Thomson Reuters.

But Oracle's revenue of US$5.61 billion, up 6 percent from last year, didn't live up to analyst expectations.

On average, analysts had projected revenue of US$5.84 billion.

Oracle's sales of new product licenses -- a key measure of a software maker's health -- also drooped. Software sales totaled US$1.63 billion, down 3 percent from last year.

In September, management had predicted that its software license would rise anywhere from 2 percent to 12 percent.

But that forecast didn't envision the dollar rising as rapidly as it did against the euro and other key currencies during October and November after a string of failures and other troubles at major banks triggered a financial panic.