BREAKFAST WITH THE FOOL
Wednesday, December 15, 1999
"A small loan makes a debtor; a great one, an enemy."
-- Publilius Syrus
Oracle Dazzles Shareholders
Richard McCaffery (TMF Gibson)
Database software maker Oracle (Nasdaq: ORCL) thrilled investors last night by reporting a 40% leap in net income for its fiscal second quarter.
The world's second-largest software company reported net income of $384 million, or $0.26 per share, compared to net income of $274 million, or $0.19 per share, a year ago. Analysts expected earnings of $0.22 per share, according to IBES International, but Oracle's performance topped the most bullish forecasts. The company's shares jumped more than $8 a share in European trading after the announcement.
It's been a breakthrough year for Oracle shareholders as the company's sales and earnings have soared, and it has cut costs to become more efficient. More than that, however, Chairman and Chief Executive Larry Ellison's move three years ago to Web-enable all of Oracle's applications put the company in a position to ride the Internet wave. Much like hardware, software, and services company Sun Microsystems (Nasdaq: SUNW), Oracle has the Internet buzz. In the last 12 months its shares have jumped 266%.
For the quarter ended November 30, Oracle reported double-digit sales growth in all of its major lines of business. Database software sales increased 17% to $651 million, business applications sales increased 31% to $168 million, and services revenue increased 10% to $1.4 billion. Total sales reached $2.3 billion, up from $2.1 billion a year ago. Oracle has a full head of steam as it helps business customers build out their Internet infrastructure.
In addition, sales of business software systems such as so-called customer relationship management (CRM) applications are soaring. Over the last 18 months Oracle made several acquisitions to beef up its CRM skills and the moves appear to be paying off.
Finally, Oracle is reducing costs by relying on the Internet and its own software systems internally. Ellison said the company would shave $1 billion in annual costs over the next 18 to 24 months. Operating margins jumped nearly six percentage points to 25% this quarter.
News to Go
Telecom equipment manufacturer Nortel (NYSE: NT) will acquire privately held Qtera Corp. for as much as $3.25 billion in common stock. Qtera makes optical networking equipment that Nortel believes will give it a first-mover's advantage in technology that improves Internet performance. The deal, expected to close early next year, will be neutral to earnings in 2000 and accretive to earnings in 2001. The Boca Raton, Florida, company has about 170 employees.
Aerospace and defense contractor Boeing (NYSE: BA) will unveil orders for 120 planes worth $8.5 billion, The Wall Street Journal reported. It hasn't been a good year for aircraft orders at Boeing as the company's backlog lags that of its European rival Airbus Industrie.
Discount department store operator Kmart (NYSE: KM) and partner Softbank, a Tokyo-based investment and asset management firm, are expected to unveil today Bluelight.com, a free Internet access service aimed at capturing customers who aren't yet on the Web, Bloomberg reported.
Struggling information technology services and distribution company Inacom (NYSE: ICO) will restructure to refocus on e-commerce opportunities. The company plans to cut 1,000 jobs during the first three quarters of next year and exit the government business.
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