Analyst Conference Summary

conference date: June 23, 2009 @ 2:00 PM Pacific Time
for quarter ending: May 31, 2009 (4th quarter fiscal 2009)

Forward-looking statements

Overview: Good increase in revenues over fiscal Q3, but not up to last-year's levels. A very good quarter considering the recession.

Basic data (GAAP) :

Revenues were $6.86 billion, up 26% sequentially from $5.45 billion but down 5% from $7.24 billion in the year-earlier quarter.

Net income was $1.89 billion, up 42% sequentially from $1.33 billion but down 7% from $2.04 billion year-earlier.

EPS (earnings per share) were $0.38, up 46% sequentially from $0.26 but down 3% from $0.39 year-earlier.

Guidance:

Guidance excludes Sun Microsystems acquisition and was given in both actual dollars and corrected for currency changes. I report actual dollar percentages:

New software license revenue down -14% to -4% y/y. Total revenue -4% to -1% y/y. Non-GAAP EPS $.29 to $.31. GAAP EPS $.21 to $.22.

Conference Highlights:

Beat their guidance. "We have a lot of company-specific momentum."

Claims GAAP EPS would have risen to $0.42 per share if not for the negative impact due to the strengthening of the U.S. dollar. Gave quite a bit of data on what would have been if the dollar had held steady against foreign currencies year-earlier. Total revenues were said to be reduced by 8% y/y due to currency. I give U.S. dollar numbers unless otherwise indicated.

Non-GAAP EPS reported at $0.46, down 1% from year-earlier. Claims would have been $0.51 with constant currency exchange rates. Non-GAAP net income was $2.3 billion, down 5% from year-earlier. Non-GAAP operating income was $3.5 billion and operating margin was 51%, up 2.4% from year earlier.

A cash dividend of $0.05 was declared.

"We grew faster and took market share from SAP in every region of the world." Even in Europe.

Exadata Database Machine launch is going well. We are already taking customers from Teradata, our number 1 competitor, with IBM and Netisa (?sp) also competing. Numerous buyers indicated.

Revenues from new licenses were $2.744 billion down 13% y/y with Americas down 12%, EMEA up 2%, Asia down 3%; from license updates and support $3.052 billion, up 7% y/y); and from services $1.065 billion, down 16%. BEA products accounted for $201 million in new license revenues.

Operating expenses were $3.98 billion. Leaving GAAP operating income of $2.88 billion. Interest and other income was negative $130 million. Income tax provision was $863 million.

There was a higher tax rate than expected due to a one-time ruling.

Repurchased 14.0 million shares at $17.85 for $250 million total. $12.6 billion in cash and investments on balance sheet at end of quarter.

Their pipeline is growing faster than their revenues. Middleware has been a star seller all year long. CRM on demand did very well.

Q&A:

Signals in quarter for stability in specific markets? Verticals had strong double digit growth, which SAP has trouble competing in. The pipeline is growing as customers realize business must go on. "I see the pipeline growing rather significantly," so the guidance for Q1 is conservative.

Do you see any further improvement in margins? Margins are from the percentage of the installed base that renews each year. We did not reach the margins by cutting R&D. So operating margins can go up as the installed base grows. But expect an impact from the Sun acquisition.

In the U.S. we are pleased with our pipeline growth. In EMEA we can't be sure we can replicate this quarter, but we hope to continue to do well.

Databases running on hypervisors rather than operating systems? That gives a boost, but not as much as Exadata, which gives order of magnitude improvements.

Are the end markets improving? Customers were panicking in January, now they are more willing to spend money, but they are still budget constrained.

We think we can beat salesforce.com in their space, and we are branching out to other on-demand spaces. We also think their is real value in having local-on demand datacenters provided by Oracle.

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