Friday, December 18, 2009

Oracle Analyst Conference report

Oracle (ORCL)

Note: I do not own any Oracle stock as of the date of this entry - William P. Meyers

conference date: December 17, 2009 @ 2:00 PM Pacific Time
for quarter ending: November 30, 2009 (2nd quarter fiscal 2010)

Overview: Strong sequential revenue growth with strong earnings.

Basic data (GAAP) :

Revenues were $5.86 billion, 16% sequentially from $5.05 billion and up 4% from $5.61 billion year-earlier.

Net income was $1.46 billion, up 30% sequentially from $1.12 billion and up 12% from $1.30 billion year-earlier.

EPS (earnings per share) were $0.29, up 32% sequentially from were $0.22 and up 16% from $0.25 year-earlier.


Excludes Sun acquisition.

Pipelines are strong, but assuming conservative close rates, 3rd quarter fiscal 2010. Revenue up 4 to 7% y/y at current exchange rates. Non-GAAP EPS $0.36 to $0.38 at current exchange rates. GAAP $0.26 to $0.28. 28% non-GAAP tax rate assumed.

Conference Highlights:

Exceeded high end of prior guidance. Software new license revenue was up 2% y/y to $1.7 billion (but down 5% in constant currency). Software updates and support revenue was up 14% y/y to $3.3 billion. GAAP operating margin was 37%, up from 35% year-earlier. This was the highest operating margin in Oracle history.

Non-GAAP results: operating income was $2.9 billion, up 9% y/y. Net income was $2.0 billion up 12% y/y. EPS were $0.39, up 15% y/y. Operating margin was 49%, up from 46.2% year-earlier.

Expects the Sun acquisition to clear with the European Commission in January.

Took market share from SAP "in every region around the world."

Exadata continues to be a "red-hot product."

Suns machines run Oracle databases "faster than IBM's fastest computer. We expect Sun to rapidly improve both its market share and margins once this merger closes." Oracle plans to avoid using Sun for the low-margin, high volume market. Will deliver "private cloud" complete solutions.

Stock holders of January 19, 2010 will receive a $0.05 per share dividend on February 9, 2010.

Cash, equivalents, and marketable securities balance ended at $20.78 billion. Debt in notes payable was $13.75 billion. 11.6 million shares of stock were repurchased for $253 million.

Operating expenses were $3.68 billion, composed of: Sales and Marketing $1.13 billion; product support expense $264 million; cost of services $832 million; research and development $708 million; general and administrative $183 million; amortization $436 million; acquisition related $10 million, and restructuring $114 million. Leaving operating income of $2.18 billion. Interest expense was $188 million. Non-operating income $33 million. Income tax provision $565 million.


Database business growth drivers? People had been putting off decisions, now some of that is starting to come back. 11g work with ISVs is kicking in as well.

Linearity? Typical linearity, not back-end loaded. But current quarter started off in better shape. Europe is lagging by about two quarters.

Guidance looks better than anticipated, does this mean there is a meaningful recovery in spending? We are seeing customers back buying, broadly. But it may be due to our strong products and sales teams. We also see the environment improving.

Are close rates improving? We did better than the close rates we expected. The economy is uneven, so we are continuing to use a very low close rates for guidance. Pipeline is very good, especially with Exadata.

Vertical standouts? Communications had a good quarter. Financial services pipeline is improving. Retail is coming back.

How big could Exadata business be? We think it will be huge, billions of dollars a year. How long it takes to get there remains to be seen. We want to group our industry standard components into machines like Exadata for transaction processing and data warehousing. Customers then don't have to do system integration. We want to apply the same strategy to operating systems, middleware, etc. We think that is what the computer business is going to look like for large customers going forward.

When we have acquired Sun all of you are going to have to redo all of your models.

Fusion products are SOA, so they can be bought individually and integrated easily.

List of my analyst conference summaries

My Oracle page

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