Oracle Gains With Grids

Oracle Corp. (Nasdaq: ORCL) announced strong earnings for its fiscal fourth quarter and year 2005 today, and execs credit its grid computing advances.

Oracle posted GAAP revenues of $11.8 billion for fiscal 2005, up 16 percent from the previous year. Non-GAAP revenues rose 19 percent from 2004 to $12.1 billion. Analysts had estimated revenues of $11.94 billion (see Oracle Reports Q4 Results).

For 2005, Oracle's GAAP earnings per share increased 10 percent to 55 cents on net income of $2.9 billion. Non-GAAP earnings per share rose 31 percent to 68 cents on $3.5 billion net income. This figure topped analyst estimates of 65 cents.

For the quarter, the software vendors GAAP revenues rose 26 percent to $3.88 billion, and non-GAAP revenues were up 32 percent to $4.06 billion. Analysts had estimated revenues of $3.89 billion.

Fourth-quarter GAAP earnings per share were up 4 percent to 20 cents on net income of $1.02 billion. Oracle’s non-GAAP EPS was up 36 percent to 26 cents on net income of $1.36 billion. This figure came in above analyst estimates of 23 cents.Speaking on a conference call this morning, Oracle CEO Larry Ellison said that uptake of grid computing was one of the main drivers behind the company’s strong performance. “People are moving from mainframes to Oracle grids,” he said.

Oracle execs on the call explained that users are now looking to run Oracle database technology across a number of smaller, low-cost servers, rather than relying on expensive, high-end mainframes to handle complex computing tasks.

Despite IBM Corp.’s (NYSE: IBM) continued attempts to keep the mainframe in the spotlight, the technology is viewed as outdated in many parts of the IT industry (see IBM Unveils Mid-Sized Mainframe and Mainframe Skills Shortage Looms).

On the product roadmap, Ellison said the company is “just a few months away” from the second release of its 10G database product. Ellison also promised that Oracle’s range of Fusion applications will be able to run on any application server.

Project Fusion is Oracle’s long-term strategy to combine its own technology with that of its recent acquisition, PeopleSoft Inc. (Nasdaq: PSFT). (See Oracle Takes Control of PeopleSoft.)Safra Catz, Oracle’s president, explained that both companies’ product development and sales teams are now fully integrated. The exec added that Oracle has also managed to keep hold of most of PeopleSoft’s customers. “The PeopleSoft customer retention rate remains in the 90th percentile,” she said.

At the time of the PeopleSoft deal, there was a degree of unease amongst a number of PeopleSoft users, particularly with regard to the issue of long-term support (see Uneasy Days for PeopleSoft Users and PeopleSoft Posse Still Peeved).

In the aftermath of the acquisition, there has also been plenty of speculation about who's next on Ellison’s shopping list (see What's Next on Oracle's Hit List?).

But on the subject of M&A this morning the CEO was cryptic. “We have no plans to buy anything that doesn’t contribute to our long-term strategy of profit growth of 20 percent a year over the next five years,” he said.

In early trading this morning, Oracle shares rose 47 cents (3.66 percent) to $13.30.— James Rogers, Site Editor, Next-Gen Data Center Forum