Oracle.. Great, Good, But Not Enough (ORCL, SAP)

Oracle Corporation (NASDAQ: ORCL) came out with earnings today, and as usual it beat estimates.  We have seen earnings of $0.38 in non-GAAP EPS on $6.47 billion in revenues (an 18% gain).  This compares to Thomson Reuters estimates of $0.37 EPS and $6.35 billion in revenues.  The initial reaction here is lower due to the earnings not being well above estimates and actually coming in soft compared to some of the whisper numbers.  Some had been hoping for $0.40 or even $0.41 EPS.

Until you get formal conference call guidance, consider this as unfinished business that is work in progress.  Thomson Reuters has estimates next quarter as being$0.53 EPS and $9.55 billion in revenues.

Here are some of the individual broken down figures behind the numbers:

• Excluding the impact of Sun Microsystems, Inc., GAAP total revenue grew 7%.
• GAAP new software license revenues were up 13% to $1.7 billion, and up 10% to $1.7 billion excluding Sun.
• GAAP software license updates and product support revenues were up 13% to $3.3 billion, but non-GAAP software license updates and product support revenues were up 12% to $3.3 billion.
• GAAP operating income was down 5% to $1.8 billion, and GAAP operating margin was 29%.
• Non-GAAP operating income was up 13% to $2.9 billion, and non-GAAP operating margin was 45%.
• GAAP net income was down 10% to $1.2 billion, while non-GAAP net income was up 9% to $1.9 billion.
• GAAP earnings per share were $0.23, down 11% compared to last year while non-GAAP earnings per share were up 9% to $0.38.
• GAAP operating cash flow on a trailing twelve-month basis was $8.2 billion.

You cannot really blame a company for being strict and tight over the last year, but on addressing $8 billion of free cash flow in the last year CFO Jeff Epstein said, “Our solid top line growth, coupled with disciplined expense management….”  Meanwhile, President Safra Catz commented on the Sun Microsystems buyout, “The Sun integration is going even better than we expected… We believe that Sun will make a significant contribution to our fourth quarter earnings per share as well as meet the profitability goals we set for next year.”  The company also noted that the Exadata unit is the fastest growing product in the company’s history.

Larry Ellison again noted how it is taking market share away from SAP AG (NYSE: AG), while he sarcastically noted its drop in revenue and trouble staffing a CEO position.

Before today’s pullback, Oracle hit a 52-week and multi-year high of $26.25.  Shares closed up 1% at $26.04, but the stock is down around $25.90 in the after-hours session right after earnings.

Sometimes great is only good, and sometimes good is not good enough.  You just have to consider that the lows at the peak of the market crash in March 2009 were $13.80 and the lows in November 2008 were $15.10.  The new 52-week trading range is $17.25 to $26.25.

JON C. OGG