Thursday, May 23, 2024

Oracle Blasts Past 4Q Estimates, Raises Outlook

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Oracle easily hurdled analysts’ estimates in its fourth quarter, posting a profit of $3 billion, or $0.60 a share, excluding one-time charges and special items, on sales of $9.6 billion.

A survey of analysts by Thomson Reuters pegged the Redwood Shores, Calif. database and business applications software vendor for a profit of $0.56 a share on sales of $9.5 billion.

“Obviously, we’re very pleased with our fourth quarter results,” Oracle President Safra Catz said during a conference call with analysts. “Our business is extremely healthy, particularly our tech business highlighted by spectacular database sales.

The $9.6 billion in sales represents a 40 percent improvement from the year-ago quarter while the $3 billion profit marked a 31 percent jump from the same period last year.

Company officials said sales of hardware, particularly sales of its Sun Exadata database machine, accounted for an additional $400 million in operating income in the fourth quarter, the first fruits of its blockbuster acquisition of Sun Microsystems.

“Now that Sun is profitable, we have increased confidence that we will meet or exceed our goal of Sun contributing $1.5 billion to non-GAAP operating income in FY2011, and $2.0 billion in FY2012,” Catz said.

CEO Larry Ellison told analysts that its Sun Exadata database machine is now officially the fastest-growing new product in company history and will continue to take share from IBM (NYSE: IBM) and other data warehousing online transaction processing vendors as more functionality is folded in.

“We beat IBM 30 times in the fourth quarter and sold the Exadata machines into some of IBM’s largest and bluest accounts like Bank of America and Thomson Reuters,” Ellison said. “The first version really focused on data warehousing. With Version 2, we’re really not focused on data warehousing but online transaction processing.”

“Our current version substantially outperforms IBM’s offerings and some of IBM’s largest customers are buying them rather than big IBM machines,” he added.

Looking ahead, Oracle (NASDAQ: ORCL) executives told analysts to expect first-quarter revenue growth of between 44 percent and 48 percent, give or take a few percentage points depending on currency exchange rates.

At this juncture, Oracle is predicting first-quarter hardware sales of roughly $1 billion and said that it was able to sell Sun hardware at a profit in the fourth quarter, something that Sun was unable to do for the last few quarters of its life as an independent company.

Catz predicted Oracle’s non-GAAP earnings will check in somewhere between $0.36 and $0.38 a share, well above analysts’ current estimates and significantly higher than the $0.30 profit it recorded in the first quarter of 2009.

She added that these preliminary estimates were “conservative” and said sales pipelines for hardware and software products were “very strong.”

For the year, Oracle posted a profit of $8.5 billion, or $1.67 a share, on sales of $27 billion, up 16 percent from sales and profits recorded in fiscal 2009.

Software license updates and product support revenue for the year rose 10 percent to $13.2 billion, a key sign of the software giant’s relative health throughout what was a dismal year for U.S. companies as a whole and particularly for technology companies.

In the fourth quarter alone, Oracle’s software license updates and support sales surged up 13 percent to $3.5 billion, the third-consecutive quarter of growth.

New software licenses in the quarter checked in at $3.1 billion, up 14 percent from the $2.7 billion it recorded in the year-ago quarter, led by a 28 percent surge in new software sales in the Americas.

For the year, new software license sales were up 6 percent to $7.5 billion.

Meanwhile, Oracle’s new hardware products and services businesses delivered another $1.8 billion, or 19 percent of the company’s total sales for the quarter, to its top line. Services chipped in another $1.1 billion.

Last quarter, Oracle easily topped analysts’ sales and profit estimates, pocketing $1.2 billion, or $0.38 a share, on sales of $6.5 billion.

At the time, Oracle said its hardware systems sales, which included Sun servers for only about a third of the quarter, was $458 million, or 7 percent of its total revenue in the quarter.

Taking jabs at SAP

It wouldn’t be a complete Oracle earnings report if its top executives didn’t take a quick jab or two at rival SAP (NYSE: SAP). While the German software developer continues to struggle through a management shakeup and disappointing sales and profits, Oracle keeps taking share and exceeding expectations.

“We continue to take large chunks of market share away from SAP,” said Oracle President Charles Phillips. “Over the last twelve months Oracle’s applications business has grown 5 percent on a constant dollar basis while SAP’s business has declined 24 percent over their previous four quarters.”

“This trend has been going on for a long time: Oracle’s applications business has grown 60 percent in the last four years while SAP’s business is 7 percent smaller than it was four years ago,” he added.

Oracle shares closed off $0.46, or 2 percent, to $22.22 a share ahead of the earnings report before inching up $0.02 a share in after-hours trading.

Along with the stellar earnings report, Oracle announced it will pay out at dividend of $0.05 a share to all shareholders of record on July 14.

Oracle shares reached a 52-week high of $26.63 a share in April after falling to a low of $19.79 in July.

Twenty-eight of the 37 analysts tracking Oracle rate the stock either a “buy” or “strong buy” with eight rating it a “hold” and one advising clients to sell.

Larry Barrett is a senior editor at, the news service of, the network for technology professionals.

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