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9/17/2010
05:35 AM
Bob Evans
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Oracle's Blowout Quarter Shuts Up Critics

Underscoring the old adage that it's better to keep your mouth closed and let people think you're a fool rather than opening it and removing all doubt, Oracle posted a blowout quarter yesterday with stronger than expected gains across the board, including several Sun hardware categories that critics said would languish under the Oracle brand.

Underscoring the old adage that it's better to keep your mouth closed and let people think you're a fool rather than opening it and removing all doubt, Oracle posted a blowout quarter yesterday with stronger than expected gains across the board, including several Sun hardware categories that critics said would languish under the Oracle brand.Software-license revenue jumped 25%, which was more than twice the top-end of the company's guidance range of 2%-12%, and overall revenue of $7.59 billion exceeded analysts' estimates by $300 million. Hardware sales brought in revenue of $1.7 billion, or 23% of the company's total revenue.

And Oracle generated higher profits out of that growth, boosting its earnings per share to 42 cents, significantly ahead of its guidance of between 35 cents and 37 cents per share.

From a research note from UBS research head Brent Thill: "Oracle's role as a strategic IT provider is resonating with customers, broadly benefiting both software and hardware product lines. Its message of integrated systems providing higher performance at lower costs (professional service & ongoing IT admin.) is driving share gains in our view. . . . ORCL's product strategy of pre-integrated, pre-optimized hardware+software systems could shake up the enterprise IT industry. Exadata, which generates both hw and sw revs, was a key driver behind database/middleware license strength."

As a result, Thill said, he's raising his full-year estimates for Larry Ellison's company in all major categories: earnings per share to $1.95 from $1.87; EPS growth rate to 16% from 12%; revenue growth to 27% from 23%; and license growth to 9% from 5%.

From a Wall Street Journal news story:

"These are fantastic numbers across the board," said Lazard Capital analyst Joel Fishbein. Oracle's hardware business, which has been closely watched since Sun acquisition was completed in January, "is showing significant acceleration," Fishbein added.

And from a Bloomberg.com news story:

"They surprised across the board, line by line," said Sasa Zorovic, an analyst at Janney Montgomery Scott LLC in Boston. He recommends buying the shares and doesn't own them. "IT spending is recovering, and in the past couple of quarters Oracle has done better than the overall IT environment."

We all know that one quarter doesn't tell the whole story, but it's significant that Oracle posted these resounding results in its fiscal Q1, which historically is a relatively slow period for the company. With its Oracle Open World starting this weekend in San Francisco, the company and its optimized-systems strategy are gaining some formidable momentum.

RECOMMENDED READING

Global CIO: Larry Ellison's Top 10 Priorities At Oracle Open World

Global CIO: As HP And Oracle, IBM And SAP Snatch Customers

Global CIO: IBM And Oracle Expose Hewlett-Packard's Achilles' Heel

Global CIO: In Hurd's Wake, An Ugly Ending For Oracle's Charles Phillips

Global CIO: Larry Ellison Looms Large Over Put-Down Of Oracle President

Global CIO: Resurrecting Mark Hurd: Larry Ellison's War With IBM

Global CIO: Larry Ellison And Mark Hurd: The Job Interview

Global CIO: Burying Mark Hurd: Hewlett-Packard And Its Future

Global CIO: Larry Ellison's Acquisition List: Who's #1?

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