Oracle has reported revenue and earnings growth in its first fiscal quarter, with its revenue from new software licences rising 7 percent, to US$563 million. That's despite a fall in revenue in its services and applications divisions.

The company cited its strength in grid computing for its strong showing. Oracle President Charles Phillips said Oracle's advantage over rivals in the database market is clear: "We have grid, they don't." Growing industry interest in deploying distributed computing platforms is driving sales of Oracle's grid-enabling database technology, he said.

The company posted revenue of $2.22 billion for the quarter ended 31 August, up 7 percent from last year's first quarter. Net income was $509 million, up 16 percent from last year. Chief Financial Officer Harry You said Oracle's trailing 12-month operating income of $4 billion and operating margin of 38.5 percent were all-time highs. However, Oracle's general expenses also grew sharply over last year as it spent $28.5 million on its campaign to acquire rival PeopleSoft. And sales of new licences for applications plunged from last year's first quarter, however, falling to $69 million, a 36 percent decline.

Phillips and other Oracle executives downplayed the seriousness of the applications sales drop. You said the company was unhappy with the applications results but expects growth in later quarters. Phillips said Oracle is restructuring its applications sales group, creating a dedicated sales force in each geographic region. It is also rolling out a major update of its E-Business Suite, version 11i10, that Phillips expects to spark sales growth.

Oracle's services group also showed declines, as services revenue fell 7 percent to $476 million and consulting revenue slipped 11 percent. Those declines, however, were expected, and will probably continue throughout the fiscal year, You said. Oracle, along with its customer companies, is increasingly outsourcing to developing countries, and its billing rates are lower for those consultants, he said. He also said Oracle's increasing reliance on outside partners has reduced its services revenue.

Executives briefly addressed Oracle's ongoing campaign to win control of PeopleSoft through a hostile, $7.7 billion tender offer to PeopleSoft's shareholders. Oracle remains committed to acquiring PeopleSoft but still faces two major hurdles, according to President Safra Catz: Winning approval of the deal from the European Commission, and the repeal of PeopleSoft's "poison pill," an anti-takeover provision in PeopleSoft's bylaws. Because of those obstacles, no deal is imminent, Catz said.