UPDATE: Oracle Profit +12% On Cost Controls, Higher Revenue

Oracle Corp.'s (ORCL) fiscal second-quarter profit rose 12% as the business-software giant benefited from cost controls, an improving currency trend and strong customer maintenance contracts, breaking a two-quarter streak of revenue declines.

Wall Street applauded the results, sending shares up 4% to $23.75 in after-hours trading. Analysts were also cheered by a statement from Oracle's management indicating that they expected the pending acquisition of Sun Microsystems Inc. (JAVA)--stalled amid a European antitrust probe--to be cleared in January.

The Redwood City, Calif.-based business-software giant, which has held up relatively well during the recession because about half of its revenue comes from support payments for past sales, Thursday showed evidence that new license sales--a key measure of future revenue growth--were also recovering.

For the quarter ended Nov. 30, Oracle reported earnings of $1.46 billion, or 29 cents a share, compared with $1.3 billion, or 25 cents a share, a year earlier. Excluding stock-compensation, restructuring and acquisition-related costs, earnings grew to 39 cents from 34 cents.

Revenue increased 4% to $5.86 billion but would have been flat if currency rates remained constant.

In September, the company said it expected adjusted earnings of 35 cents to 36 cents on a 1% to 4% drop in revenue at constant currency rates.

On a conference call with analysts Thursday, Oracle's President, Safra Catz, said the company had seen a significant improvement in conditions during the quarter.

"We're really seeing a recovery in spending," she said.

Oracle, the world's largest maker of corporate databases, is regarded as a bellwether for broader corporate technology spending trends, which have been slower to recover than consumer spending.

Joel Fishbein, an analyst with Lazard Capital Markets, said Thursday the results pointed to evidence that the tide was turning for the broader corporate technology sector.

"This suggests corporate technology spending in general is recovering and it should lift the whole tech sector," he said.

Shares in Oracle have appreciated by over a third this year amid a broader market recovery and optimism about renewed technology spending.

Catz said Thursday Oracle expected the $7.4 billion acquisition of Sun Microsystems to clear in January after Oracle agreed to concessions to maintain the independence of MySQL, an open-source database it acquired as part of the Sun acquisition.

Regulators last year launched an extended probe into the deal, citing "serious concerns" about the impact the deal could have on the database market.

EC antitrust officials have reacted positively to recent moves by Oracle to safeguard the MySQL database, according to the Wall Street Journal.

Oracle has acquired over 50 companies in the past five years as part of a drive to build its portfolio of business software applications, as part of a drive to offer its customers a broader range of business tools.

-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com

(Jay Miller contributed to this report.)

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