Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Oracle Expected to Deliver Strong Q4 on Large Software Deals

Quarterly results are due from the software giant Oracle after markets close for trading in New York. Here’s what to expect:

Analysts expect a seasonally strong quarter — it’s Oracle’s fiscal fourth — with 87 cents in per-share profits on $11.1 billion in sales. For the quarter ahead, they expect Oracle to offer guidance for 58 cents EPS on $8.6 billion in sales.

Brendan Barnicle, an analyst with Pacific Crest Securities in Portland, Ore., says Oracle landed a couple of large deals during the quarter, one with the U.S. Department of Veterans Affairs and another with the state of Washington’s university system, both of which were upgrades to existing PeopleSoft human resources software. Both are thought to have been worth more than $100 million. “It has been several quarters since we have heard of mega deals at Oracle. So, Oracle seems to be enjoying typical FQ4 seasonality,” Barnicle wrote.

That would be a change from last quarter, when Oracle reported that revenue from new software licenses fell by two percent, when they had been expected to grow. That caused Oracle to miss its earnings expectations by a penny, and its shares fell. Oracle blamed the problem on “sales execution,” saying that the large number of new sales reps it had recently hired had “run out of runway” in closing many deals.

As usual with an Oracle quarter, there will be a lot of questions about the hardware division. Broadly speaking, Oracle’s strategy has sought to build up a new line of hardware under the “Exa-” brand, which is combined to run Oracle software and aimed at specific business applications. New hardware would eventually replace sales of x86 commodity hardware, and declining sales of Unix servers.

Brad Reback, an analyst with Stifel Nicolaus, thinks Oracle’s hardware business likely “bottomed out” last quarter, and will grow as much as 12 percent sequentially, to about $754 million in sales. That would amount to a year-on-year decline of about 23 percent, but it is progress that, he argues, should continue into Oracle’s fiscal 2014.

Oracle shares opened down this morning by 19 cents, or about half of a percentage point, from Wednesday’s closing price of $34.09. The shares have risen by more than 19 percent since this time last year.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik