Oracle Corp, the world's largest database-software maker, said third-quarter profit rose 12 percent amid the first sales gain in two years.
Oracle said sales this quarter may fall, sending the shares down.
Chief financial officer Jeff Henley said revenue in the fourth quarter ending May 31 would be between US$2.61 billion and US$2.83 billion, compared with US$2.77 billion a year earlier. Analysts on average expected US$2.85 billion, according to Thomson Financial.
Sales slackened in last month as customers postponed spending amid US threats to start war in Iraq, Henley said. New software sales in the third quarter declined 4.4 percent to US$743 million.
The decline shows that chief executive Larry Ellison's strategy of boosting revenue by selling business applications has yet to pay off, said Chris Galizio, an analyst at Pioneer Investments.
"Business is not good," Galizio said. Pioneer Investments manages US$96 billion, including 772,000 Oracle shares.
The decline in software revenue was "a big negative," he said.
Oracle shares fell as much as US$0.95, or 7.8 percent, to US$11.30 in extended trading after the report. They fell US$0.10 to US$12.25 at 4pm New York time on the NASDAQ Stock Market.
Net income climbed to US$571.3 million, or US$0.11 a share, in the third quarter ended Feb. 28, from US$508 million, or US$0.09, a year earlier, Oracle said in a statement. Sales rose 2.4 percent to US$2.31 billion from US$2.25 billion.
Sales were helped by a weak dollar, which meant that overseas revenue in other currencies converted into more dollars. Oracle said it would have had a 3 percent sales decline if revenue were calculated in local currencies.
Oracle faces increasing pressure from rivals International Business Machines Corp and Microsoft Corp in the database market, analysts have said.
Last year, Oracle's lead in the US$13 billion database market declined to 39.4 percent from 41.7 percent in 2001, IDC said earlier this month. IBM boosted its portion to 33.6 percent from 31 percent, and Microsoft's rose to 11.1 percent from 9.7 percent.
The overall database market rose 0.7 percent last year.
"We would dispute some of the data that's coming out," Henley said on a conference call with reporters, arguing that it's difficult to tell what IBM and Microsoft's database sales are because they don't provide audited figures.
Sales of applications, used to manage accounting, track inventory and automate customer service, declined 5.3 percent to US$140 million. In January, Henley had said he hoped the applications business would grow in the third quarter.
"We think our applications business is coming around," Henley told reporters on a conference call. "The way you prove that to analysts is you start delivering better and better numbers."
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