Oracle earnings beat expectations

The world's second biggest software maker, Oracle, has posted a fourth quarter profit of $855m, beating analysts' lowered expectations.

But the company reported a 24 per cent drop in its key applications software business.

Oracle's sales for the quarter ended 31 May totalled $3.26bn, slightly below the analyst consensus estimate of $3.4bn. In the year-ago period, Oracle had sales of $3.37bn.

For the year to 31 May, Oracle posted sales of $10.86bn and a $2.56bn profit.

Chief financial officer Jeff Henley said: "While the economy slowed our sales growth, we still managed to increase profits and improve margins to record levels this past year. That's a pretty good financial result in this difficult economic climate."

"We think, we hope, that the worst is over," Henley added. "We can't be certain yet. People do feel like things are going to be better."

The database giant, whose shares have fallen 68 per cent from their September high, has trimmed costs and reduced its workforce to make up for a slowdown in sales caused by potential customers' unwillingness to make large software purchases.

Financial and industry analysts said Oracle faces numerous obstacles in its flagship database business where related software, server and service revenue contributed more than 70 per cent of last year's total sales.

Chuck Phillips of Morgan Stanley Dean Witter said IBM and Microsoft are gaining market share.

"Every customer we've spoken with that's selected IBM's DB2 over Oracle has done so for one reason: price," Phillips said.