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Oracle earnings beat expectations

San Francisco, Dec. 19: The Oracle Corp on Wednesday announced quarterly earnings that slightly exceeded Wall Street expectations, but at the same time, the company said it was reorganising its global sales team to counter continued lagging performance of its applications business.

In the last two years, Oracle customers have complained that the company's application product — software used to automate and track business functions, like human resource management — had bugs and was difficult to install. But Larry Ellison, Oracle's chief executive, said that customers are now satisfied with the program and the problem is that Oracle's sales staff has not been specialised enough to sell the product.

Under the new structure, which Oracle said it is already carrying out, sales people will focus either on applications, or on databases, Oracle's other core business, but not on both products.

Ellison said the company also has recently hired new top-level sales managers. “It has been an issue of sales — and sales focus,” said Ellison, who did not provide details of the reorganisation or how many sales people will be affected. “The team will do a better job of selling going forward.”

The news of the sales force shake-up came as Oracle announced quarterly earnings that came at the upper end of the company’s earlier estimates and showed a continued trend toward reviving its overall business.

It reported second quarter earnings of 10 cents per share, 2 cents higher than the consensus estimate of Wall Street analysts. The company's revenues were $ 2.3 billion, down 3 per cent from the same period a year ago. The company had projected revenues would be down 4 per cent to 7 per cent.

The key aspect of Oracle's business — licenses of software — also performed better than the company and analysts estimated.

Combined, the applications and database businesses had sales of $ 751 million, down 7 per cent from a year ago. The company projected they would be down 10 to 15 per cent.

Oracle shares, which fell 39 cents to $ 10.63 in regular trading, rose as high as $ 11.35 in extended trading after the release.

“Two thumbs up,” said Robert B. Austrian, an analyst with Banc America Securities. “It's a good result that should keep Oracle shares moving, albeit slowly, in the months ahead.”

Jeff Henley, Oracle’s chief financial officer, attributed the better-than-expected results to strengthening macro-economic conditions.

He said the company is assuming the economy will improve throughout the year, and he added that it is not projecting any major disruption in business in the event of a war in West Asia. “If there is a war, it's not something that's going to be terribly disruptive,” he said. “That's the assumption we're making.”

But while the results beat projections, the company said it continues to be concerned about its applications, a core piece of its business. For the quarter, that business was down 34 per cent at $ 108 million in sales, below some Wall Street estimates.

Soundview Technology Group, for example, estimated application sales for the quarter at $ 175 million.

For the last two years, customers have complained that Oracle's latest product, 11I, was difficult to install and had bugs, said Austrian, who noted that “The upgrade was so challenging that it was a show stopper.” But Austrian said that in the last three to five months, Oracle has solved the technological problems, and he said that the company is wise to focus on the sales force.

“They just can't seem to sell the thing,” Austrian said. But he said he thinks sales will improve with “better execution and the company getting a more successful reference base'' from customers using the product.

Oracle said that for its third fiscal quarter, its current quarter, it expects overall revenue to be equal to or as much as 4 per cent higher than the third quarter last year. And it expects its revenue from software licenses to be 5 per cent lower to 5 per cent higher than the same period last year.

Wall Street analysts said the projections were in keeping with Oracle's earlier estimates.

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