SEATTLE - New software licensing revenue growth -- the highest in 10 years for the company -- helped boost Oracle's first quarter financials.

New software licensing revenue grew 35% to $1.1 billion, the strongest growth of any quarter in the past decade, the company reported on Thursday.

Revenue for the period ending Aug. 31 was up 26% to $4.5 billion and net income grew by 25% to $840 million compared with the same quarter last year, based on generally accepted accounting principles (GAAP).

Earnings per share grew 28% to $0.16.

Applications' new license revenues helped drive growth, increasing by 65% over the corresponding period last year. Database and middleware new license revenue was up 23%, the highest growth rate in seven years for Oracle, the company reported. Oracle released a major upgrade to its database software during the quarter, helping to drive that increase. The company had 35,000 downloads of the software during the first month it was available.

Oracle's results significantly beat some analyst expectations, including those of Citi Investment Research. Citi expected 20% growth in overall new software licensing, 15% growth in database and middleware license revenue and just 33% in applications.

While database software is the historical focus for Oracle, the company is now hoping to become a dominant player in its two other lines of business: applications and middleware. Oracle figures it is No. 3 position in the middleware market, behind Microsoft and IBM. If Oracle and IBM continue to grow at their current rates, Oracle could pass IBM at the end of this year or early next year, Larry Ellison, CEO of Oracle, said during a conference call to discuss the earnings.

In applications, Oracle is behind market leader SAP AG. The companies have different strategies for growth, with Oracle trying to sell to its existing large company customers and SAP chasing small businesses, he said. "While we think the small business market is interesting because it's large, we just haven't figured out a way to make a substantial profit in that market," he said. Oracle would have to build a new sales force, products, marketing and advertising efforts in order to address the market, which doesn't promise strong revenue, he said.

The IDG News Service is a Network World affiliate.