For the fourth quarter, sales were $64.1 million, up 23 percent over the prior year, led mostly by growth in subscription and support revenue. Non-GAAP profits were 5 cents per share or $3.4 million. Sales for the year were $236 million, up 22 percent year over year. The EPS number beat the consensus of analysts by a penny. Shares are up by 4 percent in after-hours trading, having risen 4 percent already during the regular session.

I’ll be talking to CEO Zach Nelson (pictured) within the hour and will be adding a comment or two from him.

Update: I just got off the phone with Nelson and we had a quick chat about the results. Here’s a summary.

AllThingsD: Zach, the results were pretty positive. You grew revenue 23 percent year on year. What’s driving the growth?

Nelson: It’s really about the acceleration of cloud computing. There no other way to say it. Cloud computing is now moving to mission-critical functions. In 2007 I said we were reaching a tipping point with the cloud, and now the market has tipped. The new generation of companies like Square and Roku think of the cloud first as they build their operations. They’re not going to build the big IT staffs that other companies have. They’re going to skip that entirely.

What kinds of headwinds are you seeing and where?

Nothing significant. We grew by double digits in Europe, Asia and the U.S. There’s been a lot of discussion about IT spending shrinking. I think that’s a tailwind for us because we help companies cut their IT spend. We help them eliminate costs.

What are you seeing in 2012? What kind of guidance did you give?

We said we see revenue in the range of $295 million to $300 million and earnings per share of 19 to 21 cents non-GAAP. We’re going to continue to grow the top line and we’re going to hire 500 people this year.

After SAP acquired SuccessFactors and Oracle bought RightNow, people started saying Netsuite is one of the cloud companies likely to be acquired soon. What do you think?

We’re a public company, and so if anyone came along with a serious offer we’d have to consider it. But our whole mission is to build the next great software company.

SAP and IBM and Oracle and Microsft have the cloud religion these days, too. They say they can deliver their apps in the cloud just as you do. What about that?

I love it when SAP and Microsoft talk about the cloud. All they do is talk, and all they do is create more demand for Netsuite. They give credibility to the product we have built over the last decade. They may try to build a product that looks a lot like Netsuite. We’ll gobble up the demand they create along the way. It will take them a decade to do it because there’s no shortcut.

NetSuite’s press release is below.

SAN MATEO, Calif., Feb. 2, 2012 /PRNewswire/ — NetSuite Inc., the industry’s leading provider of cloud-based financials / ERP software suites, today announced operating results for its fourth quarter and fiscal year ended December 31, 2011.

Total revenue for the fourth quarter of 2011 was $64.1 million, representing a 23% increase over the prior year. Subscription and support revenue for the fourth quarter was $54.2 million, representing 23% growth over the same period in the prior year. Total revenue for the year was $236.3 million, a year-over-year increase of 22%.

Calculated billings, defined as revenue plus the change in deferred revenue, were $78.8 million for the quarter, a 36% increase over the fourth quarter of 2010. For the year, calculated billings were $266.9 million, an increase of 32% over 2010.

Cash flow from operations was $11.7 million in the fourth quarter of 2011, an increase of $7.1 million, or 156%, over the same period last year. Cash flow from operations was $36.3 million for the year, an increase of $18.0 million, or 99%, over the prior year.

On a GAAP basis, net loss for the fourth quarter of 2011 was $7.6 million, or $(0.11) per share, as compared to a net loss of $6.4 million, or $(0.10) per share, in the fourth quarter of 2010. GAAP net loss for the year ended December 31, 2011 was $32.0 million, or $(0.48) per share, as compared to a GAAP net loss of $27.5 million, or $(0.43) per share, in 2010.

Non-GAAP net income for the fourth quarter of 2011 was $3.4 million, or $0.05 per share, as compared to non-GAAP net income of $2.8 million, or $0.04 per share, in the fourth quarter of 2010. Non-GAAP net income for the year ended December 31, 2011 was $10.8 million, or $0.15 per share, as compared to non-GAAP net income of $8.5 million, or $0.13 per share, in 2010.

“NetSuite’s Q4 showed the benefit of being the disrupter rather than a disruptee, as our Cloud Computing suite continued to take market share from traditional mid-market and enterprise ERP vendors. The acceleration of our business that we saw throughout the year continued into Q4, and we turned in a Q4 that could be considered our best quarter ever as a public company,” said Zach Nelson, CEO of NetSuite. “As we enter 2012, I believe we are the best positioned company to benefit from the shift to the Cloud as customers abandon aging mission critical systems designed before the Web existed and move to NetSuite.”

This fact caused chipmaker Intel to slash its sales forecast for the quarter by $1 billion, to $13.7 billion plus or minus $300 million. Today we’ll see just how bad the damage was, and how bad it’s going to be going forward, as the company reports its results after the close of markets today.

In a note to clients, Deutsche Bank analyst Ross Seymore says not to expect many surprises from Intel. Despite the lower sales guidance, he sees little change to Intel’s overall profitability. He expects Intel’s gross margins, a key metric in measuring profitability, to come in only slightly below the 64.5 percent that Intel had previously forecast. “We see little risk to gross margins despite the lower revenue because product mix continues to be solid,” Seymore wrote.

And while the first half of the new year is always seasonally slower than the second half, Seymore expects it to be slower still for Intel. He’s expecting sales in the first quarter of 2012 to come in at $12.73 billion, with a per-share profit of 51 cents, which is below the consensus of analysts who expect Intel to book sales of $12.8 billion. He also expects the hard drive shortage to hit Intel harder in the first quarter, as the supply of hard drives dries up. Gross margins in the quarter, he expects, will drop below 61 percent. Expect conservative guidance on PC demand for the quarters ahead.

Even so, Seymore rates Intel a Buy, with a $27 price target. “We believe Intel is well-positioned to benefit from new product introductions, improved execution and stable PC demand,” he wrote. He said that competition in chip prices from Intel rival Advanced Micro Devices should “remain benign,” mainly because AMD is fabless and so is at a competitive disadvantage with Intel. Other sectors of Intel’s business, including its flash memory operations, are showing improvement.

It’s not the only one: Several enterprise software and hardware players are falling right along with Oracle. Salesforce.com, whose primary customer relationship management software rivals Oracle’s, has fallen more than $8, or more than 8 percent. Oracle’s primary software rival, SAP, is down by more than $3, or more than 5 percent. IBM has fallen $6.73, or more than 3 percent. Hewlett-Packard is down 50 cents, or nearly 2 percent. Dell is down 40 cents, or more than 2 percent. Microsoft is falling, too, but not as much.

It looks a lot like what Cannaccord Genuity analyst Richard David predicted in a note to clients this morning. Oracle is something of a bellwether for software company and corporate IT stocks in general. A lot of the problems that sapped Oracle’s results this quarter, David wrote, are specific to Oracle. But in the minds of investors it doesn’t matter:

“Much of the miss was company specific, but it won’t matter this morning. Investors are likely to use this miss as a reason to pound software on Wednesday. We believe Oracle’s miss, combined with Red Hat’s heavily punished but modest scuffle on Tuesday, will first hit infrastructure stocks like VMWare, Citrix Sysems and then for good measure high fliers like Salesforce.com. Our view is more nuanced; Oracle missed because some buyers waited for a new hardware upgrade, and on the software front the firm is behind the curve in cloud applications. We expect Oracle to catch up, but it will be through some R&D and a lot of M&A. We would “back up the truck” on Salesforce if traders knock that stock down because cloud software companies are very likely to gain significant market share from non-cloud vendors.”

Davis cut his rating on Oracle to “Hold” from “Buy,” arguing that the shares will “trade sideways for the next two to three quarters.” Even after an expected “dead cat bounce” — a quick price recovery after a significant fall — Oracle will have some work to do. “Oracle will have to rebuild confidence that the firm is not is not headed to Microsoft’s valuation level over the next few years. Therefore, we can no longer rate Oracle a Buy.”

Not everyone was quite so negative. FBR analyst David Hilal, in a note to clients this morning, lowered his estimates on Oracle’s sales and profits for fiscal 2012. He now expects Oracle to report per-share profits of $2.36, down from $2.44, and cut his sales estimate to $37.7 billion from $39 billion. He also lowered his target to $34 from $38. Even so, he’s still bullish generally, albeit with lower expectations. “The macro debate will now focus on whether IT spending is finally coming under pressure due to broader economic concerns,” Hilal wrote. “While IT spending is not immune to such macro factors, we are not forecasting a material slowdown as we believe enterprises have already been cautious regarding their spending. However, some modest pullback should be expected, particularly post a seasonally strong end to the year.”

BMO Capital analyst Karl Keirstead didn’t agree with Hilal on that point. “Given some weak recent data points from Red Hat, Salesforce.com, Intel and Accenture, we conclude that the macro IT spending backdrop in fact weakened and that the miss was not related to Oracle execution or share losses,” he wrote in a note to clients this morning. “We assumed that Oracle could manage through this tightness and we were obviously wrong.” He lowered his price target to $32 from $38 but maintained a “buy” rating.

Other analysts downgraded Oracle, too. Societé Generale analyst Richard Nguyen cut it to “Hold” from “Buy.” CLSA slashed Oracle shares to “underperform” from “buy,” and lowered its price target to $30 from $36. Deutsche Bank analyst Thomas Ernst lowered his target price to $29 from $33. It’s just one of those days.

So what happened? A few things, as Oracle execs tried to explain on a conference call.

• The currency effect: As President and CFO Safra Catz explained, what had been a 1 percent tailwind for currency effects turned into a 2 percent headwind. With all the violent swings in the value of currencies around the world as compared to the U.S. dollar, Oracle suffered a negative effect that pinched revenue.

• Deals didn’t close during the quarter: Catz said that in the final days and weeks of the quarter, some customers added an extra layer of executive approval to close deals to buy Oracle stuff. That meant that some deals Oracle had expected to close before the quarter’s end moved into the next quarter. Catz said that Oracle has taken steps to better manage deal flow to take this into account. It is consistent, however, with recent statements from other enterprise IT vendors, like IBM and NetApp.
• Transitions: Oracle’s SPARC server business just switched to a new chip called the T4, which was unveiled late in the quarter. The machines require a total upgrade, and that means a lot of testing with existing applications, which can slow down deals for the new machines, while at the same time sapping demand for the prior generation of products. That had a lot to do with hardware sales dropping by 14 percent year over year to $953 million. As Catz put it: “We saw good early demand for the new SPARC SuperCluster, but only released the product for general availability at the very end of the quarter, allowing us to ship only a couple.”

Catz also predicted that hardware sales will decline as much as 14 percent this quarter, although CEO Larry Ellison was bullish on its growth prospects later this year. New software license revenue, a key metric gauging software sales, is expected to grow in a range of 2 percent to 12 percent. Total sales are expected to grow in the range of 3 percent to 7 percent, and per-share earnings are expected to come in between 56 and 59 cents, which is in line with the consensus of analysts.

There were a few things that went right. Ellison did what he usually does on a conference call, and crowed about examples where Oracle is beating a competitor. This time, the targets were IBM, Cisco Systems and SAP, but not his usual punching bag, Hewlett-Packard. Oracle won several competitive deals from Big Blue and Cisco, as well, with customers as varied as Australia’s University of Melbourne, the U.S. Food and Drug Administration and the Hyundai Kia Motor Company.

Ellison also hinted that Apple is a big Oracle customer. He mentioned a “a very large American smartphone manufacturer” that had bought more than 30 Oracle Exadata systems as it built out its cloud. Unless I’m missing something, there’s really only one company that fits that description, and that’s Apple. Its use of Oracle gear within the mix at its North Carolina data centers has been speculated about before, but never confirmed by Apple directly. (Big surprise, that.)

The company reported a profit of 54 cents per share on $8.8 billion. The results fell short of the consensus view that Oracle would report sales of $9.23 billion and a per-share profit of 57 cents. Oracle shares, which had risen by 56 cents, or 2 percent, during the regular trading session, to close at $29.17, fell sharply in after-hours trading. As of 4:15 pm ET, Oracle shares were trading down $1.72, or 6 percent, on the news.

In the plus column, Oracle said its operating margin on a non-GAAP basis improved to 45 percent, and that it expects those margins to keep rising. Operating cash flow grew by 45 percent, as well, to $13.1 billion.

The company boosted its salesforce by 1,700 during the first half of the year, in an effort to boost sales of its Enterprise Resource Planning and Customer Relationship Management software products. Co-President Mark Hurd said the additional sales personnel should help sales improve in the second half of the fiscal year. (The quarter was Oracle’s fiscal second.)

The company said its board of directors approved a $5 billion share buyback and a 6-cent-per-share dividend.

CEO Larry Ellison said in a statement that sales of so-called engineered systems — essentially hardware that contains a lot of exclusive Oracle technology — surged versus the year ago period. Sales of Exadata database hardware and Exalogic servers both grew by 100 percent, he said. He also said that Oracle shipped its first SPARC SuperCluster during the quarter, and expects to commence deliveries of Exalytics Business Intelligence machines this quarter.

Oracle’s statement is below. I’ll be adding more to this post as I go through the press release, and will call out some highlights. The company is hosting a conference call shortly.

(The pitch-perfect image of the Team Oracle plane doing a dive during San Francisco’s Fleet Week was taken by Ingrid Taylar for About.com.)

Oracle Reports Q2 GAAP EPS Up 17% to 43 Cents; Q2 Non-GAAP EPS Up 6% to 54 Cents

Trailing Twelve Month Operating Cash Flow Up 45% to $13.1 Billion

REDWOOD SHORES, CA–(Marketwire -12/20/11)- Oracle Corporation (NASDAQ: ORCL – News) today announced fiscal 2012 Q2 GAAP and non-GAAP total revenues were up 2% to $8.8 billion. Both GAAP and non-GAAP new software license revenues were up 2% to $2.0 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 9% to $4.0 billion. Both GAAP and non-GAAP hardware systems products revenues were down 14% to $953 million. GAAP operating income was up 12% to $3.1 billion, and GAAP operating margin was 35%. Non-GAAP operating income was up 3% to $3.9 billion, and non-GAAP operating margin was 45%. GAAP net income was up 17% to $2.2 billion, while non-GAAP net income was up 6% to $2.8 billion. GAAP earnings per share were $0.43, up 17% compared to last year while non-GAAP earnings per share were up 6% to $0.54. GAAP operating cash flow on a trailing twelve-month basis was $13.1 billion.

“Non-GAAP operating margins increased to 45% in Q2,” said Oracle President and CFO, Safra Catz, “and we expect those margins to keep growing. Operating cash flow over the last twelve months grew to $13.1 billion; that’s up a remarkable 45% compared to the preceding twelve month period.”

“We have expanded our worldwide sales capacity by adding over 1,700 sales professionals in the first half of this fiscal year,” said Oracle President, Mark Hurd. “We believe that this increase in our field organization combined with innovative new products like Fusion Cloud ERP and Cloud CRM will enable solid organic growth in the second half of this year.”

“Sales of our engineered systems accelerated in Q2,” said Oracle CEO, Larry Ellison. “Exadata growth was well over 100% compared to last year, and Exalogic grew more than 100% on a sequential basis. We shipped our first SPARC SuperCluster in Q2 and expect to begin deliveries of our Exalytics system and the Oracle Big Data Appliance in Q3.”

Oracle announced that its Board of Directors authorized the repurchase of up to an additional $5.0 billion of common stock under its existing share repurchase program in future quarters.

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 January 11, 2012, with a payment date of February 1, 2012.

Despite a wobbly economy, especially in Europe, IT spending seems to be holding steady. Brian Schwartz, an analyst with ThinkEquity, checked in with 16 IT industry contacts and asked about their spending plans for the coming year. The answers, he says, point to positive results in Oracle’s report today. “Contacts surveyed, on average, finished 1 percent above their plans in Q2 and estimate their customers’ overall IT budgets will grow about 3 percent in 2012,” Schwartz wrote in a note to clients on Dec. 15.

Also in Oracle’s favor: The priority in IT spending is shifting away from things that generate revenue and toward things that help control costs. “This transition could provide a nice tailwind for Oracle’s many cost-savings products around data-center consolidation,” Schwartz writes.

Of the 16 people surveyed, Schwartz says, seven were positive, five were neutral and four were negative. Those in the positive column said they expect their IT budgets to grow incrementally in 2012, and they seemed bullish on Oracle’s database and middleware offerings, which help reduce the overall footprint of their data centers. Those in the negative column cited uncertainty about Europe and the financial services sector. Some financial customers are cutting their spending on things like outside consultants, and sales cycles for certain products are growing longer.

The consensus view of Wall Street analysts calls for Oracle to report sales of $9.23 billion and a per-share profit of 57 cents. Schwartz rates Oracle a Buy with a $36 price target, which would amount to a 26 percent improvement over Monday’s closing price of $28.61. Oracle shares have fallen by a little less than 9 percent since the end of 2010.

The company’s troubles aren’t anything you couldn’t intuitively guess: Consumer PC sales are weak for a variety of reasons, ranging from the popularity of tablets like the iPad to a frail consumer economy, combined with slumping sales to state and local governments facing squeezed budgets. Dell’s strengths: Sales of PCs and servers to enterprises and the federal government.

Even with weaker sales, that mix should allow Dell’s profits to hold up. Whitmore writes in a note to clients: “We expect solid margins due to favorable product mix — healthy corporate demand and softer consumer demand — benign commodity prices and greater contribution from Dell’s higher margin Storage and Server offerings.” Memory chip prices are down by 17 percent and LCD display prices are down 3 percent, giving Dell a little wind at its back from a cost perspective, and possibly offsetting the expected impact from a shortage of hard drives caused by the flooding in Thailand.

Whitmore expects Dell to report sales of $15.6 billion and margins of 22.2 percent, and an operating margin of 7.2 percent, implying per-share profits of 44 cents. Whitmore’s estimates are slightly below the consensus view of analysts’ calls for Dell to report earnings per share of 47 cents on sales of $15.7 billion.

Looking ahead, Whitmore expects Dell to emphasize an ongoing cycle of upgrades to corporate PCs and servers. He expects estimates for the 2012 fiscal year could improve, because right now they “appear conservative.”

The world’s largest cell-phone company by volume posted a net loss of €68 million ($93.6 million), beating Wall Street expectations of a €321 million loss. Sales dropped 13% to €8.98 billion.

Read the rest of this post on the original site »

My admittedly imprecise liveblog notes from the conference call are below:

2:01 pm: And so we wait for the start of the earnings call. There’s some nice classical guitar music playing.

2:03 pm: Still waiting for people to dial in. You’re welcome, operator, for my patience.

2:04 pm: And we’re getting under way.

Boilerplate. Forward-looking statements, blah blah blah.

Here’s Tim Cook. This is our first earnings call since the passing of Steve Jobs. Steve was a great leader and mentor and inspired people at Apple to do extraordinary things. Only Apple brings together software hardware and services. As we move forward, we will continue doing that.

And here’s Peter Oppenheimer. Record September quarter revenue and earnings. Record on Mac sales, record September quarter for iPhone sales.

Year-over-year increase in revenue was iPad, Mac and iPhone sales.

Mac sales increased strongly in each of the operating segments, especially Asia. MacBook Pro was especially strong, he says. Portables 74 percent, but desktop sales were strong too. Six million Lion downloads during the quarter.

Some 6.6 million iPods sold, down year over year, but ahead of our expectations, and iPod touch accounted for more than half of iPods sold.

2:09 pm: iPod is still strongest in most of the countries we track.

iTunes: $1.5 billion revenue. 16 billion songs downloaded.

iPhone: 17.1 million iPhones. 21 percent year-over-year growth. Sales in Asia Pacific doubled year over year.

We expected sales to decline as the result of new-product rumors of new iPhones.

Ended the quarter with 5.75 million in channel inventory, which is within the target.

$11 billion recognized revenue from iPhone sales compared to $8 billion previously.

2:11 pm: 93 percent of Fortune 500 are trying iPhones, up from 91 percent last quarter. Citing Lowe’s, rolling out iPhones with a custom application for employees. SAP, Jaguar, LandRover, CSX all named as customers.

Naming enterprise customers as part of an earnings call, if I’m not mistaken, is something new for Apple.

iPad: 11.1 million versus 4.2 million year-ago quarter. We said from the beginning the tablet market is a huge opportunity. (You got that right.)

2:13 pm: $6.9 billion in iPad-related revenue.

And now talking about the airline industry? What? Did Apple just pivot toward showing a new, enterprise-friendly face?

iCloud comments: We believe iCloud is the easiest way for customers to manage their content. The App Store has 500,000 applications, now available in 123 countries.

Retail sales up 1 percent year over year. Strong Mac sales offset by lower iPhone sales. 1.1 million Macs sold during the quarter. Again, about half of these are people who have never owned a Mac. The halo effect is still intact.

2:17 pm: 357 stores open at the quarter. $10.7 million average sales per store. $679 million sales total at retail. 77.5 million visitors.

Now guidance: International expansion. 77 stores (?) will open, about three-quarters of them outside the U.S. (I may have gotten that number wrong.)

Cash: $81.6 billion as of the end of the quarter versus $76.2 billion net of cash paid for Nortel patents. Cash flow from operations 10.4 billion.

2:19 pm: More guidance. This December quarter will have 14 weeks. $37 billion versus 26.7 billion with a gross margin of about 40 percent.

EPS: $9.30 in the quarter expected.

Oppenheimer sums up the year’s unit sales results: 72 million iPhones, 32 million iPads, 17 million Macs.

2:21 pm: And now time for Q&A:

Goldman Sachs’s Bill Shope: Given that 4S was launched close to holiday season, any risk of shortage?

Cook: We’re off to a great start with the 4S. Thrilled with the start. Confident we will have a large supply. Not sure about whether supply and demand will be in balance. Demand high now. Confident we will set all-time record for iPhones this quarter.

2:22 pm: Cook: As we predicted, iPhone sell-through decline did occur among the rumors, but not as much as we thought. The reduction hit extreme highs during the back end of the quarter.

Cook: In our wildest dreams we couldn’t have gotten off to a better start with iPhone 4S.

Katy Huberty from Morgan Stanley, asking about gross margins.

Oppenheimer: We expect gross margins to be relatively flat. We think there’s a favorable component cost environment. And a strong mix of iPhones. We expect these to be offset by higher cost structures and lower price points for the other iPhones. Plus the stronger dollar.

Question for Cook on traction in China. How big could China be for Apple over time? Could it be as big as the U.S.?

Cook: China progress has been amazing. It was just 2 percent in fiscal 2009. Now it’s 12 percent. It is our fastest-growing major region by far. $4.5 billion of revenue in the quarter, and that’s four times or up 270 percent year over year.

A year ago, in fiscal 2010, we were just above $3 billion in China sales. We have placed new stores there, six in greater China. Online store hasn’t been open a year yet. We are now up to 7,000 points of sales on the iPhone in China. How far can it go? Certainly in my lifetime I’ve never seen a country with as many people rising into the middle class, with people wanting to buy Apple products. It has quickly become No. 2 of top revenue countries, and we’re placing additional investment and stores there as well as doing quite a few other things to continue to deliver our products to China. Also placing additional focus on areas that have shown great promise. Brazil was up 118 percent year over year. Russia is looking more promising. The Middle East has significant opportunity. Several of these markets Apple has not been strong in are being introduced to the iPhone and then getting excited about other products that we have. In China, the sky is the limit. I wouldn’t discount some of the other places. (Wow, that was a long answer!)

2:30 pm: Question about supply chain for Tim. Didn’t get it.

Cook: We have an outstanding team in this area. We keep trying to improve all the time. We have used our balance sheet to do strategic deals to get parts that were important. (Like flash memory, for one thing.) Our approach has been, and I think will always be, to do business with as few people as we can, to go very deep with them. You can’t do that when you go out to many, many different people. They give us great quality and reasonable prices.

Now a question about the competitive market for tablets. Asking about Amazon Fire.

Cook: We had an outstanding quarter. At the same time, we were setting a Mac record. But we’ve seen several competitors come to market to try and compete. They have had different form factors and price points. I think it’s reasonable to say that none have gained any traction thus far. As they were coming to market, our share went up. We were responsible for three out of every four tablets sold.

Question from Gene Munster at Piper Jaffray: Asking about deferred revenue from carriers because of the launch of the iPhone 4S.

Oppenheimer: We waited. The biggest impact was the rumors late in the quarter. We have just started selling the iPhone 4S, and it’s off to a fantastic start with Sprint and KDDI.

2:34 pm: Gene now asks about size of the tablet market. How do you think about the market?

Cook: We thought from the beginning it would be huge, but it has been even greater than we thought. We’ve sold 40 million on a cumulative basis. If you forecast out in time, the tablet market will be larger than the PC market. That is not a guidance number, it’s just something I believe. There will be many more people that can access it. I think it’s a huge opportunity for Apple across time.

Barclay: Ben Reitzes: Do you have any idea of how many units were pushed out and deferred into the next quarter? And in general, what do you think, how should we be thinking about pent-up demand relating to the iPhone 4S launch?

Cook: You can’t run the experiment twice. We won’t know how many we would have sold. I believe it was substantial. That is the reason we called it out. Anyone monitoring the press (especially AllThingsD) would have known about it. When we launched iPhone 4 we did 1.7 million, and when we launched 4S we did 4 million in the first weekend.

Question about iPad category: In Macs, you’re up sequentially. Any thoughts on iPad seasonality?

Oppenheimer: We would expect to establish new records for both iPhone and iPad in the December quarter. On Mac, we will continue to outgrow the market.

Shannon Cross: Can you talk a little more about Siri in the future? Is it a feature or is there a more fundamental way to interact with devices?

Cook: The number of people interacting with it is amazing. We see this as a profound innovation. Over time, many, many people will use it in a substantial way. What percentage of their input will be by that? Our guts have been telling us that it is substantial and that it’s an incredible innovation.

Cross: Comment on supply chain on hard-drive issues in Thailand?

Cook: Hearts go out to people of Thailand. We have lots of factories that supply them. There are several factories that are not operable, and recovery time is not known. As you can appreciate, weather has not allowed the ability to assess. Our primary exposure is on the Mac. The number of drives and drive components that come from Thailand is high. There will be a shortage of disk drives. How it affects Apple, we placed our assessment in the guidance we’ve given.

2:41 pm: Tony Sacconaghi. Asking Cook to comment on ongoing patent fight with Samung. What are your ultimate objectives on litigation? Injunction or royalties?

Cook: No comment on litigation. We spend a lot of time and money and resources in coming up with incredible innovations. We don’t like it when someone else takes those. That is why we, unfortunately, have been pushed into the court system as a result.

Toni: What kind of remedies do you see?

Cook: No comment.

Toni: Price reductions on the 3G offering. You’ve gone to free, and cut prices dramatically. How are you thinking about this price reduction? New segments of consumers?

Cook: We did it because we wanted to make the iPhone more accessible to a broader market. We took 3GS to free in the U.S. and other markets. We also lowered the price on the iPhone 4 to $99. We’ve done both of those.

2:44 pm: Uh-oh. My audio just went dead.

Okay, it’s back.

Question about issues relating to unibody casings.

Cook: We treat every concern about a supplier very seriously. We’re investigating the situation. Factored the supply outlook as we see it into numbers supplied earlier.

NAND Flash and DRAM really declined in price last quarter. LCD displays, too, will continue in favorable levels. Most of the other components we expect to fall at or above normal trends. That is with the asterisk concerning hard drives and Thailand.

2:47 pm: We could be moving to a new phase for the company where some of the fastest-growing products in the product line, that could see some price elasticity, could be fastest-growing products next year. Could that put pressure on gross margins? Can you still expand operating margins next year?

Oppenheimer: December quarter we expect gross margin on 40 percent. We have nice leverage on operating margin, just over 30 percent. We are going to just continue to offer the best products we can. You’ll see us be aggressive, and where customers want to buy, that’s fine. We just want them to buy our products.

2:49 pm: Credit Suisse: On the iPad side, could you speak about distribution rollout in that product? Was there any pause rolling out to other countries? Then another question about BRIC countries. What do you need to do in those countries?

Cook: We are in 90 countries on iPad. We have about 40,000 points of sale around the world. To put that in some context, we have 50,000 on iPod and 120,000 on iPhone. There are still countries left to do.

With iPhone, it’s crystal clear there was slowdown. That was not the case with iPad. On the last call I said we were coming into supply-demand balance in some countries with iPad. Then we got into balance around the world. We couldn’t feel better, honestly. The extent of the usage: Comscore 97 percent of Web usage on tablets is from iPad.

In terms of other countries, we have started placing efforts in them. We wouldn’t have done $900 million in Brazil without any effort. There are a few countries with protectionist measures, where the prices are high, where there’s no local content. The basic approach with all the countries are the same with the game plan in China. It’s the rate and pace of the rollout, whether to involve everything we did in China. In China we did everything we know how to do. Everything we do in the U.S., we do in China. We would not do all that in the other countries I mentioned.

2:54 pm: Bank of America question. Any thoughts on cash allocation? Dividend? Buyback? (Yeah, no.) Also a question on cannibalization of Macs via iPad.

Cook: Some are deciding to buying an iPad instead of a Mac, but most are deciding to buy an iPad instead of a Windows-based PC. So we come out very well in that situation. Even so, Mac had its best quarter ever.

Cash: To date, we want to maintain flexibility. The cash isn’t burning a hole in the pocket. We invest the cash conservatively. We won’t do something silly with it. We’ve taken money and done things with it. We’ve acquired several companies and some IP. We’ve invested in the supply chain, and we build out our stores and provided for product tooling and the like. The cash we do spend we do a good job of it and we use it in the right places.

I’m not religious about holding cash or not holding it. We will continually ask ourselves what’s in Apple’s best interests. It’s a topic for the board.

Oppenheimer: Of the $81 billion we have in cash, $54 billion of it is offshore.

2:57 pm: Question: Is buying back shares, is that perhaps kind of a philosophical white flag that you’re not able to produce value through innovation?

Cook: No one would say we’re waving the white flag on innovation. We’ve got a pipeline that is unbelievable.

Q: Would that hold you back from buying back?

Cook: No, they are distinct things. The cash is always a topic, and we’ll always conclude to do what’s in Apple’s best interest. And if you look at what we’ve done with it, you’ll agree.

Cook: We think the smartphone market will absorb the handset market. Handset market is 1.5 billion units and handset is 400 million so far. The big win is to eat into the 1.5 billion, not just for us but for others.

Now a question about the extra week in the December quarter.

Oppenheimer: The extra week will conclude on New Year’s Eve. Usually a good day for us, sales-wise.

A question on Japan: Disparity on units versus revenues in Japan.

Cook: A huge percentage of Japan was from iPhone 4 launch. Year-over-year compare was tough. Mac had a great quarter in Japan, however. The iPhone was a negative year-over-year compare, but we have a strong start in Japan. It was one of the first seven countries.

Chris Whitmore: Asks about medium- to longer-term iPad opportunity. Do you see an opportunity to move it upmarket?

Cook: I don’t want to get into what we might do. We see the tablet market as a huge market. We could not be happier with our position in it. We have some fantastic things in the pipeline. After selling 40 million, we have a good handle on what to do next.

Aaaaand my audio went dead again.

Aaaaand now it’s back again.

And that’s it for the conference call. A very interesting call, overall. Some intriguing variations from the usual script.

Sales were $28.27 billion and per-share profits were $7.05, falling short of Wall Street consensus estimates of $29.45 billion and $7.28 per share.

Apple sold 17.07 million iPhones during the quarter, which is okay when you consider that the rumor mill about a new iPhone was seriously buzzing but good during the summer months, and yet didn’t seem to dampen demand entirely, but given the Street expected at least 20 million units sold, it’s a miss, though not an unprecedented one. That makes it 72.3 million sold during the fiscal year.

IPad sales hit 11.12 million, amounting to growth of 21 percent. Apple finished the year having sold 32.4 million iPads. That’s a solid beat on expectations.

Mac sales continued their their steady climb upward. Apple sold 4.9 million Macs during the quarter, bringing the fiscal year’s total sold to 16.8 million. This is yet another record quarter for Mac sales.

Apple exits the year with $81.5 billion in combined cash, short-term and long-term investments. Certainly, calls for Apple to do something with this enormous pile of wealth besides “preserving,” as it has been for a decade or more, will intensify.

Apple shares finished the day up $2.25, or less than 1 percent, and closed at $422.24 during the regular trading session.

Here’s Apple’s statement in full:

CUPERTINO, Calif.–(BUSINESS WIRE)– Apple® today announced financial results for its fiscal 2011 fourth quarter ended September 24, 2011. The Company posted quarterly revenue of $28.27 billion and quarterly net profit of $6.62 billion, or $7.05 per diluted share. These results compare to revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share, in the year-ago quarter. Gross margin was 40.3 percent compared to 36.9 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter’s revenue.

The Company sold 17.07 million iPhones in the quarter, representing 21 percent unit growth over the year-ago quarter. Apple sold 11.12 million iPads during the quarter, a 166 percent unit increase over the year-ago quarter. The Company sold 4.89 million Macs during the quarter, a 26 percent unit increase over the year-ago quarter. Apple sold 6.62 million iPods, a 27 percent unit decline from the year-ago quarter.

“We are thrilled with the very strong finish of an outstanding fiscal 2011, growing annual revenue to $108 billion and growing earnings to $26 billion,” said Tim Cook, Apple’s CEO. “Customer response to iPhone 4S has been fantastic, we have strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline.”

“We are extremely pleased with our record September quarter revenue and earnings and with cash generation of $5.4 billion during the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the first fiscal quarter of 2012, which will span 14 weeks rather than 13, we expect revenue of about $37 billion and we expect diluted earnings per share of about $9.30.”

Apple will provide live streaming of its Q4 2011 financial results conference call beginning at 2:00 p.m. PDT on October 18, 2011 at www.apple.com/quicktime/qtv/earningsq411. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue and earnings per share. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 25, 2010, its Forms 10-Q for the quarters ended December 25, 2010; March 26, 2011; and June 25, 2011; and its Form 10-K for the fiscal year ended September 24, 2011 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices.

It will, of course, be Tim Cook’s first earnings call as CEO since taking over the job on a permanent basis this summer. There will naturally be questions from analysts about any changes in direction, however slight, that may result following the death of founder and Chairman Steve Jobs. Don’t expect much in the way of changes, nor in meaningful answers to questions about them. As much as Jobs is missed, Apple is in the strongest business shape it has ever been in, and shows no sign of slowing down.

Today’s earnings report, which will also be the final report of Apple’s 2011 fiscal year, will only make that fact more plain. Unless something went terribly wrong — and there is no sign that anything did — it will be Apple’s first year with sales north of $100 billion.

The consensus of Wall Street analysts says that Apple will report sales of $29.45 billion, which would be an improvement of more than $9 billion and 45 percent over the same quarter last year, and profits of $7.28 per share, which would be a 57 percent jump.

But as is always the case with Apple, the consensus has a way of being conservative. Sales of the iPhone 4, despite the buzz leading up to the release of the iPhone 4S, remained strong, said Gene Munster, analyst with Piper Jaffray, in a note to clients yesterday.

Munster expects Apple to report sales of 22 million iPhones in the quarter, slightly more aggressive than some estimates, by buyside analysts, of 20 million. “We believe sales of earlier iPhone models, like the iPhone 3GS, held up through the September quarter, which suggests global customers also remained interested in the iPhone 4 head of the anticipated update,” Munster wrote. The iPhone accounts for 46 percent of Apple’s sales.

That means good things for Apple’s gross profit margin, as components used in the older models became cheaper. Munster expects a gross margin of 39 percent, beating Apple’s previous guidance of 38 percent. However, if Apple maintains the gross margin it reported last quarter — 41.7 percent — it implies a much higher overall profit of $7.68 a share, Munster said.

On the iPad front, which accounts for 20 percent of Apple’s business, Munster expects Apple to report sales of 10 million units, which he admits may not seem like meaningful growth versus the year-ago quarter. But remember that last year’s September quarter came right on the heels of the launch of the iPad 1 2. The comparisons will be tough.

And don’t forget the Mac, another 20 percent of revenue. Market research firm NPD reported Mac sales up 20 percent in each of the three months of the quarter. Munster says the street consensus implies Mac unit sales growth of 16 percent, but the NPD numbers imply growth closer to 20 percent.

Finally, all eyes will be on Apple’s guidance for the holiday quarter just ahead. Apple will likely give its usual conservative guidance, which has averaged about 2 percent below the Street on revenue and 10 percent below the street on per-share earnings. But it typically beats the Street’s estimates by an average of 9 percent and 28 percent, respectively. Right now, the consensus view on the December quarter calls for sales of $36.6 billion and profits of $8.98. Plan accordingly.

Munster rates Apple shares “overweight” — the equivalent of “buy” — with a price target of $607. Yesterday, Apple shares hit another lifetime high of $426.70, and closed at $419.99. The shares are up about 27 percent this year.

Update: I corrected my reference above to the timing of the iPad 2 release.

Gone is the webOS hardware business acquired with Palm last year, though the WebOS software business remains alive and well for now. The business of selling phones and tablets was unceremoniously killed in a move reminiscent of Cisco Systems’s decision to kill its Flip video camera business. At least we know why: As AllThingsD reported exclusively Tuesday night, sales of HP’s TouchPad have been embarrassingly bad, particularly at Best Buy.

Soon to be going — either spun off or sold — is HP’s consumer PC business. Exactly what will happen there is anyone’s guess. Will HP create an independent company or sell it? If it’s to be a sale, the smart money says that Samsung would be a possible buyer, and sources have told AllThingsD that HP was shopping the PC business around Asia earlier this year. But there are several reasons that HP would choose to follow the model of Motorola and spin the unit off into an independent company. As CEO Léo Apotheker said on the conference call, all options are on the table, including a spinoff sale to another company, sale to private equity, or even no transaction at all. The reason for making today’s “strategic options” announcement is that it frees up management and the board of directors to take a deep dive and look at what’s best. My guess: Bet on a spinoff.

My notes from the conference call are below.

2:01 pm: And so we’re waiting for the conference call to start. Lots of soothing music to keep our minds off all the questions reeling in our heads.

Among those questions: What kind of transaction can we expect for Hewlett-Packard’s PC unit? A spinoff or a sale? Will it include the enterprise PC business as well as the consumer PC business?

Was there ever any attempt to sell the webOS assets? What about the webOS and Palm-related portfolio of patents? I bet those are pretty valuable right now. Will HP sell them or keep them?

The call is underway.

Léo will be speaking shortly.

2:05 pm: And here’s Léo.

Today is all about driving shareholder value and addressing the challenges in our business. I’ve been CEO for nine months and made some tough decisions. There are four elements to the path forward.

Consumers are changing the use of the PC, and sales of the TouchPad are not meeting expectations. (Where have I heard that before?)

The plan to separate PSG is to sharpen HP’s focus on cloud and other services. There are tactical issues to consider. We are still facing headwinds, stemming from the Japan earthquake, in the printing business.

There is a clear secular movement in the consumer PC space. The tablet effect is real, and the TouchPad is not gaining momentum in the marketplace.

For our PC business to function properly, it needs to be able to make decisions that are best for itself. We anticipate we will take 12 to 18 months to complete this process.

Additionally, we have been tracking the progress of webOS. We were successful at launching software that was praised. We are exploring options of how best to optimize the webOS assets in the future. The devices aren’t getting traction. Continuing to execute in this market space is no longer in HP’s interest. The webOS hardware business will be shut down by Q4.

Now on to services. The transformation will be a multiquarter journey. We are focused on addressing sales delivery and other challenges.

He’s now announcing John Visentin as the head of Enterprise Services. He’s an IBM veteran and has previously run Enterprise Services. He’s Ann Livermore’s replacement, and thus has big shoes to fill.

Now on to tactical challenges. In business critical services, we think the Itanium platform is the best in the industry. We are fully committed. We are doing everythying we can, including pursuing legal action against Oracle’s “anticompetitive behavior.” (Long story, but you can read several posts I’ve written about this.)

Fourth: Adding more value-added intellectual property. More software. More big data. More cloud.

2:14 pm: A good example is the acquisition of Vertica.

And now he’s talking about the acquisition of Autonomy. Here are the financials: This is a milestone, because there is a very real need to address the explosion of structured and unstructured data.

HP will pay $42.11 per share, though Léo is giving the amounts in British pounds.

2:17 pm: In 2010, Autonomy had gross margins in the high 80 percent range, and operating margins in the 40-plus percent range. Autonomy will continue to operate separately.

As an executive who has spent most of my career in software, it is a world I know well. We believe this transaction will unlock synergies across multiple industry verticals. We are building a strong HP software business.

We are focusing on what needs to be fixed, shut down and considered for separation.

A comment on guidance. I am lowering the Q4 guidance in order to be realistic about where we are. I don’t take this action lightly. I know our investors don’t like being in that position, and neither do I.

I am taking ownership for these actions and investments as we shape the new HP.

Cathie Lesjak, CFO, is now speaking and doing the numbers. “This is the toughest guidance in my career as CFO.”

Company gross margin of 23.3 percent was down 70 basis points year on year. Printing and webOS posted lower gross margins, which were offset by favorable commodity environments.

Generated $3 billion in earnings from operations, down 14 percent sequentially and down from $3.4 billion a year ago.

HP repurchased $4.6 billion of shares.

Segment info: Personal systems, revenue of $9.6 billion, down three percent from prior year.

Commercial client revenue grew nine percent, led by workstations. Consumer down 17 percent. Ouch. Desktops and notebooks equally affected by drop in consumer demand.

Lesjak says webOS ran a loss. Clearly, the sell-through wasn’t what was expected. It quickly became clear that pricing parity wouldn’t generate demand. The price cuts had added incremental cost to our model. We took a five-cent charge to EPS. We would expect a bigger loss in Q4.

To make this a financial success would create more risk without certain returns. We will explore options for strategic value of the software. (Hint hint, webOS software is for sale. Again.)

Now on to the printing business. Three million Web-connected printers sold. Sell-through is slowing in supplies. Supplies business tends to follow the economy. Expect a revenue and margin impact for the next few quarters.

Still more troubles from Japanese currency and the rise in the yen. Expect that to continue, too.

Our services transformation is a four- to six-quarter journey.

Industry standard servers: We expect to show share gains, though we expect growth to slow. HP remains number one in blade services.

Revenue decline in business critical servers is down nine percent because of the legal mess with Oracle.

3PAR sales continue to accelerate. Seems it was worth taking on that bidding war with Dell last year.

Balance sheet: Total gross cash of $13 billion. Looks like the Autonomy deal is going to consume $11 billion of that, if I read the presentation of that deal correctly.

Long-term EPS commitment is now gone. I think Lesjak said it was $7.14 in EPS by 2014. I may have mangled that. Whatever, they’re not going to make it now, anyway.

Q4 EPS expected at 44 to 55 cents a share.

Léo is back. This is about a transformation of HP for a new future. HP is at a critical point in its existence. These changes are fundamental. The changes will transform HP. The transformation starts today.

And here’s the Q&A. Should be interesting.

2:39 pm: Morgan Stanley. Can you talk about which customer segments and geos weakened in July, and which ones will weaken in October?

Léo: A summary of this — we saw our business in Asia grow, and if you look at the other two regions, they declined in constant currency. On a rough basis, consumer PCs declined while commercial increased. We had good performance in ESSN. But public sector, which is 10 percent of business, is being impacted by budget constraints on both sides of the Atlantic.

Lesjak: We had a back end loaded quarter, but it was softer that we expected in July.

Barclays asks about services: Did you cut enough when you bought EDS? Is 12.5 percent margins low enough?

Léo: We are making progress on services. One thing we are focused on is growing the top line. We didn’t do it. We now have a leader for this business. What we are trying to achieve is a much better mix, from the execution standpoint. We can increase our coverage and bench in application and services. We are engaged in a systematic account review, so we are optimizing value.

Lesjak: I said 12.5 percent. We are affected by the weakness in public sector, and also by business critical systems. (There’s the Itanium fight with Oracle rearing its head again. -Ed.)

Citigroup ask about the synergies between printers and enterprise business. How do you feel about keeping printers and enterprise together?

Léo: IPG, the printing unit, is important to HP. It has been leading the disruption of the analog printing market.

IPG has the opportunity to reinforce its strengths. We are driving our document- and content-management solutions. With the acquisition we announced today, we will be able to provide IPG with additional intellectual property.

Sanford Bernstein asks about Autonomy. You are paying a fantastic price. He’s worrying that HP is overpaying for Autonomy at a time when HP’s stock is at a historic low. It’s going to cost you 15 percent of your market cap. Also it’s going to eat into the cash position.

Léo: Let me start by making sure everyone understands what Autonomy represents. It will allow us to lead a large and growing space, enterprise information management. It will help customers manager the explosion of information. It will position HP in a large and growing space. It will provide differentiated IP for services. It will give IPG a base for content management.

Léo: Autonomy has grown its revenue at compound annual growth rate of 55 percent over three years. We think we can extract a lot more out of it by combining it with HP.

Lesjak is speaking about cash. We have repurchased $15.6 billion worth of shares. We would spend to rebuild our balance sheet, and will moderate share buybacks.

2:49 pm: Cross Research on Personal Systems Group: Why not spin it off now? And also on webOS. What about the plan (announced at D) for putting webOS in PCs?

Léo: What the board and management team have been working on is to look at our options, and what the board has decided to do is look at all the options. This will allow us to look at it much more closely. Over time, a decision will crystallize. All I can say now. We will refrain from commenting further. On webOS software business, we are looking at all our strategic options regarding the software. The software has been received very well. We will be looking at all of the options to third parties, to others who need this kind of option. Licensing or other possibilities, to extract value from webOS.

Wow.

Goldman Sachs question: How should we think about strategic actions versus the need for further cost reductions, in light of the view that there’s been an underinvestment in prior years?

Léo: He’s not taking the bait to repeat the “Blame Hurd” message from last quarter.

BMO’s Keith Bachman, whose downgrade caused so much share-value loss yesterday, asks about the growth prospects at Autonomy.

Léo: When you analyze the numbers of Autonomy, they have been executing a shift to software as a service, or cloud services. They are one of the few traditional license-based companies who have executed such a successful transaction. Roughly one-third of revenues are cloud-based. Not going to talk about forward growth rates.

Raymond James: On PC, you’ve talked about strong return on capital in that business. Can you talk about what changed?

Léo: One of the reasons we announced today was so that we can study. We are going to look at all of our options, and also want to make sure everyone understands that all options are possible, including a nontransaction. Which means they may not ultimately sell the PC unit.

2:56 pm: Stifel Nicolaus asks: Operating profitability for two segments: Enterprise seems to be at 13 percent, which is below previous guidance. And the same question to imaging and printer, now 14.7 percent, though having supply-chain problems.

Lesjak: The macro picture has deteriorated since last quarter. We saw softness in Europe and Americas. Also there’s the lower mix of systems in Business Critical Systems. (Another reference to the Oracle fight.)

Another question, though I didn’t catch the firm that asked: Is there scope to cut more costs at HP at the group level?

Léo: How are we performing compared to peers? In fact, we are actually competing rather well. Our market share across the vast majority are stable, or in a few cases we have eked out gains. Are there any specific issues affecting our business in particular? We are facing macro trends. What HP is facing are essentially the following things: We are being challenged on business critical systems. We have an issue in printing, which was impacted by Japan. Overall, we have one issue that we want to tackle, and that’s our productivity in the salesforce. We are going to create a unified platform for the salesforce to go to market. We are now going to have a regular cadence and discipline around managing major accounts in this company.

3:01 pm: UBS question. How much of the $332 million in operating losses is related to webOS? How long is the leash to lower the losses or get to break-even?

Lesjak: We remain at the operating expenses of one to two cents a quarter.

A question from Jeffries about free cash flow. Can you give us an understanding of the cash balance? Also, do we have any bullet payments? Also around Autonomy: If it’s going to be independent, but if you see synergies, how will you integrate it?

Léo: Yes, we will run Autonomy as a separate entity. Of course we will be looking for synergies as quickly as possible. First off, we will give Autonomy access to our channels. We will be working across our softare teams and theirs. IPG is one case. There are other things we can do with ESSN, as you can imagine.

Lesjak: We ended with $13 billion in gross cash. With our lower top-line expectation, and the cash charges related to webOS shutdown, that is putting downward pressure on cash flow. We expect free cash flow for the year of $8 billion.

3:04 pm: Question from Gleacher about storage. What will drive that business to higher growth rates?

Léo: Our storage business is going through a mix shift. 3PAR is growing triple digits year over year. We are in the early days of the P6000(?) launch.

Lesjak: 3PAR revenue is up triple digits on a normalized basis.

ISI question: If PSG transition could take a year, do you expect disruptions in PSG revenue?

Léo: I just want to be sure that people understand that PSG will be managed in a normal manner. The team and employees and everyone will continue as if we are a normal day-to-day business. That is the expectation that we have. I’m sure we can manage whatever transition happens.

One more question, from RBC Capital: Can’t hear it well. Sorry, RBC.

And that’s a wrap.

Related posts

• Hewlett-Packard Says Goodbye to PCs, webOS
• HP Pulls Plug on webOS Hardware, Leaves OS Future in Doubt
• HP And webOS: But They Seemed So Happy Together!
• Liveblogging HP’s “Everything Including the Kitchen Sink” Conference Call
• HP’s Apotheker: We Struck Out with WebOS, but Maybe Someone Else Wants a Swing?
• Viral Video: Like Palm’s Creepy Naked Lady, TouchPad’s Floating Celeb Heads Get the HP Boot
• Licensing webOS May Not Be Much of an Option for HP
• Hewlett-Packard’s PC Business: What Happens Next?
• Worth More Dead Than Alive: Could HP Turn a Profit on Palm’s Patents?
• With HP’s Raising of the World’s Biggest White Flag, Will Jon Rubinstein and Todd Bradley Surrender Too?

Sales were $8.6 billion, helped mostly by new software license sales that grew 21 percent to $2 billion, while updates and product support revenue grew 12 percent to $3.7 billion. The consensus estimate was $8.34 billion. Sales grew 47 percent from the same period a year ago.

Non-GAAP per-share earnings were 51 cents, beating the 46-cent forecast estimate of analysts surveyed by Thomson Financial. Earnings after one-time items were 37 cents, up from 29 cents a year ago.

Gross margins on Sun-branded hardware increased to 53 percent.

Shares are up almost 4 percent in after-hours trading.

There’s a quote from CEO Larry Ellison, reminding us how fast his new products are, and digging once again at the competition:

“Sun’s new SPARC Supercluster computer shattered the world record for database transaction processing performance by running 3 times faster than IBM’s fastest computer, and a stunning 7.5 times faster than HP’s best ever database performance,” said Oracle CEO, Larry Ellison. “Our new generation of Exadata, Exalogic and SPARC Supercluster computers deliver much better performance and much lower cost than the fastest machines from IBM and HP.”

Here’s another quote, from Oracle co-President (and former HP CEO) Mark Hurd, about the Exadata product line:

“Since joining Oracle I’ve met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together,” said Oracle President, Mark Hurd. “That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology.”

Yes I would say there’s enthusiasm. It was precisely because of the Exadata line that Macquarie Research upgraded Oracle today.

More from the conference call, which starts at 5 pm ET.

4:53 pm: Seven minutes to go before the Oracle earnings conference call starts. Right now it’s all mellow classical guitar.

Call is running a little late.

5:10 pm: And we’re underway with the safe-harbor statement.

Ellison, Hurd and president Safra Catz are on the call.

Americas grew 32 percent in U.S. dollars.

5:15 pm: Balance sheet: $24.8 billion in cash and short-term investments.

Generated $3.7 billion in free cash flow.

5:15 pm: Safra Catz is now speaking. We exceeded the high point of license guidance. Even excluding a payment for legal fees, we beat guidance by 4 cents.

5:16 pm: All geographies reported double-digit growth.

5:16 pm: “We continue to take share from SAP.”

5:17 pm: With Sun, included operating margins were 44 percent, which is better than SAP. [Another dig.]

5:18 pm: Hardware guidance: $1.1 to $1.2 billion in revenues.

Non-GAAP EPS expected to be 48 to 50 cents, and 34 to 36 cents on a GAAP basis.

Here’s Larry:

5:19 pm: Our goal is to be No. 1 in high-end market for servers. Right now our numbers are behind HP and IBM.

5:20 pm: IBM’s and HP’s servers are slow, and software is slow and expensive and have no software value-add. [Another dig at the competitors.]

5:22 pm: Exadata pipeline continus to grow. We expect our new generation of Sun machines will enable us to win significant share, and position us in the No. 2 position behind IBM very soon. And then we’ll fight it out for No. 1.

5:23 pm: Now Mark Hurd is speaking.

5:23 pm: I want to focus on our opportunities to grow significantly.

5:24 pm: Deal volume was spread across companies of all sizes and strength in the public sector as well.

5:24 pm: All of our customers and competitors are reacting to us.

5:25 pm: 150,000 Middleware customers. We ended the quarter with a record hardware backlog.

5:26 pm: Now going to Q&A:

A question from UBS. Are you starting to see a halo impact on adoption of the Oracle suite?

Larry: Close rates are improving. You’ll see great improvement in Exadata sales from Q2 to Q3. Because it’s new, people were running a lot of benchmarks and trying it out first. We’ll sell a lot more Exadata in Q3 than in Q2.

As for the halo effect, when you buy these servers you buy them to run specific software. Engineer them at the same time and make sure they run well together. We have a huge advantage over IBM and HP. The notion of systems, hardware and software that run well together will dominate the high end of the business.

Q: You clearly have a lot of irons in the fire with Fusion apps coming up and Exadata. Focus on Exalogic. Can you share early feedback from customers and compare that to Exadata ramp.

Mark: Exadata experience benefits Exalogic. We’ve matured the use case, we think we know where the targets are. The Exadata experience is a big deal for us.

5:31 pm: A question about Fusion Middleware.

Larry: We’ve been in the middleware business for a long time. With release 11 everything has been rewritten. It’s a much better user experience, you can patch our entire suite with a single file. We think the fact that we have an integrated suite gives us a huge advantage over IBM.

5:33 pm: A question about Europe. It was better than expected. Apps business was really strong. Look at competitors. You’ve been gaining share against SAP. We are seeing a pickup in general environment.

Hurd: I’m not an economist, but we’re doing well in Europe. It was broad-based. It was not singular to a deal or country. It was broad-based to countries where we have been gaining share. It’s been one quarter after another, a pretty steady beat.

Larry: We had a wonderful set of industry specific applications, in telecommunications and banking and retail, and that’s unique vis-a-vis SAP. that has helped us a lot to establish us in a lot of industries. Also Fusion is right around the corner.

5:35 pm: Q: How frequently is an Exadata deployment resulting in the displacement of a competitor’s product?

Hurd: About 70 to 75 percent of the time. About 20 to 25 percent of the time it’s a consolidation.

We’ve sold Exadata now in 50 countries, and 30 to 35 percent of our customers have made a second purchase. You’re starting to see repeat purchases. We’ve learned a lot about this and so as we launch Exalogic we can accelerate our learnings.

5:36 pm: Q: Margin was also great. What can we expect going forward and what were one-time items?

Catz: In general, it’s the business. The only nonrepeatable thing is the $120 million legal settlement, which we will not repeat. Hardware margins and operating margins, this is something we’ve done for many years.

5:38 pm: Q: What is visibility for database licenses?

Larry: A couple quarters ago, someone noticed database licenses were growing nicely. We think Exadata is going to be a nice turbocharge to our database business. Across the board our database business is going to get strong with Exadata.

I just looked at after-hours trading in Oracle shares and they’re up more than 4.5 percent.

Hurd: “The secret to Exadata is bringing the smarts to the data, versus bringing the data to the smarts.”

5:42 pm: Q: What continues to drive the database business? Is it just core database, add-ons?

Larry: We think our technology is getting faster and more reliable at a faster rate than that of our competitors.

5:43 pm Larry: As far as applications, we think there are lots of reasons we continue to gain share every quarter over the last few years over SAP.

It’s the industry-specific applications. We have telecom companies that are running only Oracle software. We have some banks that are making the same kind of commitments up and down the stack. SAP just doesn’t have that.

5:44 pm: Larry: We’ve got this extremely modern Java-based suite called Fusion that is going to strengthen our competitive stance against Salesforce.com and against Workday.

5:46 pm: That seems to be it. The call is concluded.

Wall Street was expecting big things from “Avatar”–this is what happens when you’re the biggest movie in history–and it delivered.

The film’s performance helped push News Corp.’s quarterly earnings above Wall Street’s expectations, generating revenue of $8.8 billion and earnings of 32 cents per share. Analysts had been looking for $8.23 billion and 22 cents, respectively.

Some of that lift came from Rupert Murdoch’s movie unit, which recorded the highest operating income in its history. But News Corp. (NWS), which owns this Web site, had a pretty good quarter all the way around. Even its newspaper properties, which have been a drag on the company for some time, are on the rebound, with The Wall Street Journal posting a 25 percent jump in ad revenue.

Per usual, there’s next to nothing in News Corp.’s documents to suggest that it’s in the Internet business in any way. The company does mention that its Digital Media Group–essentially, MySpace and a few other properties–saw operating losses increase “principally due to lower search and advertising revenue.” But it doesn’t offer more information.

I’m sure we’ll get into some details and perhaps updates on other News Corp. digital efforts, like fighting Google (GOOG) and building pay walls, during the company’s earnings call. Check out the liveblog here.