Oracle Earnings Rebound: All Eyes On OpenWorld

Oracle's first quarter financials showed some strength amid mixed results. Hurd promises SAP Hana-killer announcement at next week's Oracle Open World.
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Oracle on Wednesday reported mixed financial results for its first fiscal quarter of 2014 ended August 31, with software up, hardware down and net income and earnings per share improving.

Oracle returned to growth after two quarters that fell short of earnings estimates. The company reported new software licenses and cloud software subscriptions increased 4% year-over-year to $1.6 billion. License renewal and support revenues increased 7% to $4.4 billion. Oracle database, Goldengate data-integration software and BI software led software growth.

Hardware sales continued to lag, falling 14% to $669 million. The company said sales of engineered systems, including Exadata, continue to grow, but it acknowledged that top-of-the-line Sparc M series (Unix) server sales are lagging.

Oracle's total quarterly revenues increased 2% year over year (4% in constant currencies) to $8.3 billion, beating Wall Street estimates, according to Reuters.

Oracle's profit picture improved, with net income increasing 6% from Q1 2012 (8% in constant currencies) to $2.1 billion. The first quarter performance initially raised the company's stock price in after-hours trading, but downbeat estimates for the second quarter ultimately weighed on shares.

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Oracle co-president Safra Catz said the company faces particularly tough comparables to the company's best quarter in 2012, so she issued cautious guidance for a 4% decline to 6% increase in revenue for the second quarter. She cited government austerity measures and lukewarm economic conditions as curbing growth, but competition from fast-growing cloud rivals including in CRM and Workday in HCM and ERP is also a factor.

Co-president Mark Hurd claimed that Oracle is gaining share against its rivals, which may be the case with competitors in on-premises software. SAP's software revenue for the second quarter ended in June was 982 million euros ($1.28 billion), down 7% year-over-year and 3% in constant currencies. But Salesforce, Workday and other cloud vendors continue to rack up double-digit gains. In their most recent respective quarters, Salesforce revenues were up 31%, Workday revenues were up 71% and NetSuite revenues increased 35%.

Hurd also took advantage of the Wednesday conference call with analysts to highlight announcements expected at next week's Oracle OpenWorld conference in San Francisco. The company's in-memory-database answer to SAP Hana was the first thing mentioned.

Oracle CEO Larry Ellison was absent from Wednesday earnings call, attending a "very important Americas Cup Race," Catz reported. But in a prepared statement, Ellison offered what sounds like a preview for his opening keynote at next week's Oracle OpenWorld event in San Francisco.

Touting the coming in-memory option for Oracle database, Ellison said, "Virtually every existing application that runs on top of the Oracle database will run dramatically faster by simply turning on the new In-Memory feature. Our customers don't have to make any changes to their applications whatsoever; they simply flip on the in-memory switch."

That's a clear shot across SAP's bow, though we're sure to hear more pointed barbs from the captain of Oracle.

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