Arik Hesseldahl

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Oracle Earnings Meet the Street as Profits Rise, Sales Drop

Oracle just reported its earnings results for the quarter ended in August, and the headline is that sales are down, though net profits on a GAAP basis are up.

On a non-GAAP basis, which is the number everyone looks at first, Oracle earned 53 cents a share, up 11 percent, on sales of $8.2 billion, which were down 2 percent.

The results met the consensus view of analysts, who had expected Oracle to earn 53 cents a share on $8.4 billion in sales. Oracle shares fell 49 cents, or about 1.5 percent, during the regular trading session on the Nasdaq exchange to $32.23 a share. The shares fell by 59 cents, or nearly 2 percent, after hours after the earnings results were released.

Oracle has been arguing that as it works on transitioning on the hardware business it absorbed when it acquired Sun Microsystems in 2010, sales will fall and profits will rise as it moves toward selling fewer products that command higher profit margins. As CEO Larry Ellison put in an interview at D: All Things Digital in May: “Sales are going down in hardware, but the unprofitable part is going away. Our margins are the highest of anyone in the server business. The sales are down 20 percent, but the profits are up.”

The company also declared a cash dividend of 6 cents a share.

Here’s Oracle’s announcement:

Oracle Reports Q1 GAAP EPS Up 15% to 41 Cents; Q1 Non-GAAP EPS Up 11% to 53 Cents
Trailing Twelve Month Operating Cash Flow Up 9% to $14.0 Billion

REDWOOD SHORES, CA–(Marketwire – Sep 20, 2012) – Oracle Corporation today announced that both fiscal 2013 Q1 GAAP and non-GAAP total revenues were down 2% to $8.2 billion. GAAP new software licenses and cloud software subscriptions revenues were up 5% to $1.6 billion, while non-GAAP new software licenses and cloud software subscriptions revenues were up 6% to $1.6 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 3% to $4.1 billion. Both GAAP and non-GAAP hardware systems products revenues were down 24% to $779 million. GAAP operating income was up 7% to $2.9 billion, and GAAP operating margin was 35%. Non-GAAP operating income was up 1% to $3.6 billion, and non-GAAP operating margin was 44%. GAAP net income was up 11% to $2.0 billion, while non-GAAP net income was up 6% to $2.6 billion. GAAP earnings per share were $0.41, up 15% compared to last year while non-GAAP earnings per share were up 11% to $0.53. GAAP operating cash flow on a trailing twelve-month basis was $14.0 billion, up 9% compared to last year.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q1 GAAP earnings per share would have been $0.03 higher at $0.44, up 24%, and Q1 non-GAAP earnings per share would have been $0.03 higher at $0.56, up 17%. Both GAAP and non-GAAP total revenues also would have been up 3%, GAAP new software licenses and cloud software subscriptions revenues would have been up 10%, non-GAAP new software licenses and cloud software subscriptions revenues would have been up 11% and both GAAP and non-GAAP hardware systems products revenues would have been down 21%.

“On a non-GAAP basis, new software licenses and cloud software subscriptions sales grew 11% in constant currency and operating margin increased to 44% in Q1,” said Oracle President and CFO, Safra Catz. “Q1 operating cash flow increased to a record high of $5.7 billion. We’re off to a good start in the new year.”

“Exadata, Exalogic, Exalytics and our other engineered systems grew more than 100% in the quarter,” said Oracle President, Mark Hurd. “For the full year, we expect to double engineered systems sales to well over $1 billion. Oracle’s new cloud business is also approaching a $1 billion annual run rate. These two businesses will drive Oracle’s growth for years to come.”

“A little more than a week from now we will announce lots of enhancements to the Oracle Cloud,” said Oracle CEO, Larry Ellison. “There are more CRM, ERP and HCM applications as a service, and more Oracle database, Java and social network platform services. Our new infrastructure as a service is available in the Oracle Cloud and as a private cloud in our customers’ data center, with the unique ability to move applications and services back and forth between the two. Join us at Oracle OpenWorld for all the details.”

The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on October 12, 2012, with a payment date of November 2, 2012.

Q1 Fiscal 2013 Earnings Conference Call and Webcast
Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 861602. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle’s Q1 results and Fiscal 2013 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 6071749.

About Oracle
Oracle engineers hardware and software to work together in the cloud and in your data center. For more information about Oracle ( NASDAQ : ORCL ), visit www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.


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