Oracle Revenues Down, But Earnings Up 8%

Oracle first quarter revenues for its 2010 fiscal year were down 5%, but earnings per share were $.22, up 8%, reported Oracle CFO Jeff Epstein Wednesday.

First quarter revenues were $5.1 billion, down 5% from the same quarter the previous year, but net income was up 4% to $1.1 billion, according to generally accepted accounting principles. The growth in net income was due to "substantially improved operating margins" of 34% and disciplined expense management, said Safra Catz, president. Earnings per share were cut $.02 by the reduced value of foreign currencies in which Oracle does business, compared to U.S. dollars, Epstein said.

Operating income was up 14% to $1.7 billion, and operating cash flow, on a 12-month trailing basis, was $8.8 billion or up 10%, he said.

New software license revenues were down 17% to $1 billion in the first quarter. Software maintenance revenues and product support revenues were up 6% to $3.1 billion.

As part of its quarterly earnings announcement, Oracle officials said the board of directors had announced its third cash dividend of $.05 per share to be paid to stockholders on Nov. 4. The first dividend of $.05 per share was paid on May 8, and a second was paid on Aug. 13. The statement hinted at dividends to come as well. "Future declarations of quarterly dividends …and payment dates are subject to the final determination of the Oracle's Board of Directors," the announcement said.

"By substantially improving operating margins, we were able to increase Q1 earnings per share, even though revenues decreased slightly," said Catz.

Oracle CEO Larry Ellison touted a new product introduction, the Exadata Version 2, a database machine for data warehousing and online transaction processing. "This new combination of Sun hardware and Oracle software is now the world's fastest computer system for both OLTP and data warehousing," he said in the earnings announcement.

Oracle is in the process of buying Sun Microsystems for $7.4 billion, and at last report, Sun's hardware sales were declining as Sun customers awaiting the outcome of the deal. Finishing it has been delayed by a European Commission investigation into possible anti-competitive aspects of deal--mainly Oracle acquiring the open source database system, MySQL.

Ellison has been building up faith in Sun's Sparc hardware line by saying Oracle "will invest more in Sparc than Sun does now," but no one is sure whether the message will take hold until Oracle can announce a definite roadmap for Sparc's future.

Oracle in the past has not been a hardware company, except for Exadata 1, a database and data storage machine produced on HP hardware, which it introduced a year ago. For Exadata 2, Ellison has dismissed HP as Oracle's partner and replaced its hardware with Sun's. Both Oracle and Sun continue to operate independently until the European Commission investigation is completed, expected sometime in January.

Oracle made some of its most specific claims of making headway in application software versus the company that it identifies as its chief rival on the application front, SAP.

In North America, Oracle application business grew 8% in the quarter, while SAP's declined 50%, Oracle president Charles Phillips said. In Europe, Oracle grew its business 3% while SAP, based in Germany, experienced "a negative 39% for SAP's most recent quarter," Phillips claimed.

Saswato Das, global director of SAP communications, responded: "We have not reported our figures for the same period and it's not an apples to apples comparison. Such comparisons made each quarter by Oracle are inaccurate at best and inappropriate in fact."

"It seems to me that SAP is the most mentioned company in Oracle earnings calls," Das continued. "What it suggests to me is that such an obsession with SAP is a sign of Oracle’s insecurity more than SAP’s vulnerability. We continue to be the market leader in business applications.

"Oracle President Safra Catz blaming her slow database sales on SAP is like Kanye West blaming Taylor Swift for his bad public relations," he said.

Oracle has been investing heavily in business application companies and Oracle Fusion middleware as an add-on sale to its strong database business.
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