Analyst Conference Summary

conference date: March 24, 2011 @ 2:00 PM Pacific Time
for quarter ending: February 28, 2011 (third quarter fiscal 2011)

Forward-looking statements

Overview: Another strong quarter.

Basic data (GAAP) :

Revenues were $8.76 billion, up 2% sequentially from $8.58 billion and up 37% from $6.40 billion in the year-earlier quarter.

Net income was $2.12 billion, up 13% sequentially from $1.87 billion and up 78% from $1.19 billion year-earlier.

EPS (earnings per share) were $0.41, up 11% sequentially from $0.37 and up 78% from $0.23 year-earlier.

Guidance:

Fiscal Q4 at current exchange rates: new software growth 9 to 19% y/y; hardware product 6 to 12%; total revenue 9 to 13% growth y/y; non-GAAP EPS $0.69 to $0.73; GAAP EPS to $0.56 to $0.60. Assumes 28% tax rate.

Conference Highlights:

"Just a great quarter." Customers are energized by products and Oracle gained market share.

Hardware gross margins increased to 55%, so "we are now completely confident that we will exceed the $1.5 billion profit goal we set for the overall Sun business for the current fiscal year." Exceeded guidance easily.

Foreign currency rates

Non-GAAP numbers: Operating income was $3.9 billion, margin 44%. Net income was $2.8 billion, up 42% y/y. EPS $0.54. Margin was same as year-earlier, which is remarkable because of the addition of hardware sales due to Sun acquisition.

New software license revenue grew 29% y/y to $2.2 billion. Software license update and product support revenue grew 13% to $3.7 billion. Hardware systems revenue was $1.0 billion. Hardware systems support revenue was $0.63 billion.

Exadata and Exalogic had an excellent quarter with revenue up 50% sequentially (from Q2). Signed major cloud computing deals including Salesforce.com.

Cash dividend was increased to $0.06 from $0.05 per quarter.

Cash and investment balance was $24.3 billion. 7.9 million shares repurchased at average price of 31.54, costing $252 million.

Foreign exchange rates had a 2% positive effect on revenue in the quarter. Revenue growth by region: Americas 35%, EMEA 19%, Asia 32% in U.S. dollars.

Operating expenses of $5.78 billion included: sales and marketing $1.618 billion, product support $299 million, hardware systems $759 million, services $954 million, R&D $1.127 billion, general and administrative $286 million, amortization $612 million, acquisition expenses $30 million, restructuring $92 million. Interest expense was $204 million. Income tax provision $683 million. Taxes were below guidance due to R&D tax credit renewal.

Hired sales people during the year, continuing to hire.

Q&A:

Application business? European applications up 47%. Strong in Asia and Americas too. Industry verticals helped, as did Fusion module availability. Existing customers are buying additional products, others are upgrading.

Any Japan impact on the supply chain? So far it is all fine.

Exadata adoption trends? Adoption is broad-based, with good quarter rack adoption. We saw repeat buying. We are now in over 80 countries. The pipeline is up.

What is driving the rapid Exadata and Exalogic? Ramping Exalogic is as encouraging as Exadata was. The stuff just works; you show a customer how they can consolidate a lot of infrastructure with more than double the performance with single stack accountability and lower cost, that is a powerful value proposition.

Can margins go higher? We still think there is room for margin improvement in hardware. "Quite a few more points to go."

We have increased investment in Solaris, Java, and Sparc (CPUs), which combined with the software gives customers a lot of confidence in the value proposition. We still resell some third-party hardware, but we are decreasing that.

OpenIcon Analyst Conference Summaries Main Page
Oracle Investor Relations Page

Search

More Analyst Conference Pages: