Oracle Earnings Miss Expectations; Hurd Reportedly Eyed by Blackstone for Dell

Quarterly earnings from the business software giant Oracle just crossed the wires and they’re slightly below what analysts had expected.

Earnings on a per share basis were 65 cents on revenue of $9 billion. That’s a penny short of the consensus view of 66 cents and $400 million shy of the $9.4 billion in revenue that analysts surveyed by Thomson Reuters had expected.

Oracles shares fell 6 percent quickly in after-hours trading. The shares closed up slightly at $35.75 during the regular session.

It looks like there are a lot of reasons for the miss. New software licenses fell by 2 percent, which is completely not what was expected from many analysts, some of whom had predicted new licenses to grow by more than 7 percent.

Hardware sales also continued to fall. Oracle acquired Sun Microsystems in 2010, and has been seeking to rebuild its hardware business with a line of new systems that in time are expected to overtake dwindling sales of the commodity systems. Obviously that hasn’t happened yet, as hardware system sales fell 23 percent year on year to $671 million. Hardware support revenue fell by 6 percent.

Oracle also said that without the currency impact owing to the strong U.S. dollar versus foreign currencies, its per-share earnings on a GAAP basis would have been better by a penny.

Update, 1:58 PM: Oracle shares are now down by more than 7 percent to $33.10 after hours. Another thing that may be weighing on the stock is this story from Fortune concerning Dell and private equity fund Blackstone. Blackstone is seriously weighing a move to bid against Dell CEO and founder Michael Dell and his private equity partner Silver Lake. Additionally, the story says that Blackstone would like Oracle president, and former Hewlett-Packard CEO, Mark Hurd to run Dell if it were to prevail in such a bid. I’m hearing from sources familiar with the matter that Blackstone has indeed been in touch with Hurd.

Here’s Oracle’s original announcement. I’ll have a little more to say as I take a closer look at the numbers.

Oracle Reports Q3 GAAP EPS Up 6% to 52 Cents; Q3 Non-GAAP EPS Up 5% to 65 Cents

Cloud Software as a Service Revenue Up 111%, Trailing Twelve Month Operating Cash Flow of $13.7 Billion

REDWOOD SHORES, CA–(Marketwire – Mar 20, 2013) – Oracle Corporation ( NASDAQ : ORCL ) today announced that fiscal 2013 Q3 total revenues were down 1% to $9.0 billion. New software licenses and cloud software subscriptions revenues were down 2% to $2.3 billion. Software license updates and product support revenues were up 7% to $4.3 billion. Hardware systems products revenues were $671 million. GAAP operating income was up 1% to $3.3 billion, and GAAP operating margin was 37%. Non-GAAP operating income was down 1% to $4.2 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $2.5 billion, while non-GAAP net income was down 1% to $3.1 billion. GAAP earnings per share were $0.52, up 6% compared to last year while non-GAAP earnings per share were up 5% to $0.65. GAAP operating cash flow on a trailing twelve-month basis was $13.7 billion.
Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q3 GAAP earnings per share would have been $0.01 higher at $0.53, up 8%, and Q3 non-GAAP earnings per share would have been approximately $0.01 higher. Total revenues also would have been 1% higher and new software licenses and cloud software subscription revenues would have been 2% higher than reported.
“Our non-GAAP operating margin increased to a Q3 record of 47%, and we expect it to reach an all-time high for the fiscal year,” said Oracle President and CFO, Safra Catz. “Both operating cash flow and free cash flow were at record levels for a Q3, with operating cash flow of $13.7 billion over the last twelve months.”
“The Oracle Cloud is the most robust and comprehensive cloud platform available with services at the infrastructure (IaaS), platform (PaaS) and application (SaaS) level,” said Oracle President, Mark Hurd. “In Q3, our SaaS revenue alone grew well over 100% as lots of new customers adopted our Sales, Service, Marketing and Human Capital Management applications in the Cloud.”
“This month we will begin deliveries of servers based on our new SPARC T5 microprocessor: the fastest microprocessor in the world,” said Oracle CEO, Larry Ellison. “The new T5 servers can have up to eight microprocessors while our new M5 system can be configured with up to thirty-two microprocessors. The M5 runs the Oracle database 10 times faster than the M9000 it replaces.”
Q3 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: 591704. 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 Q3 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: 1437646.
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.