Oracle’s Quarterly Earnings Beat Estimates

on Dec 19, 2012
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On Tuesday 18 December Oracle (NASDAQ:ORCL), the provider of enterprise software and computer hardware products and services, reported earnings for the second quarter of its fiscal year beating analysts’ expectations on the back of growing demand for cloud-based software.

**Second Quarter Results**
In its press release Oracle announced that fiscal 2013 Q2 total revenues increased by 3 percent to $9.1 billion (£5.59 billion) above analysts’ forecasts of $9.01 billion (£5.54 billion). Non-GAAP earnings per share were up 18 percent to $0.64 (£0.39) beating expectations of $0.61 (£0.38).
“New software license sales and cloud subscriptions grew 18% in constant currency,” said Safra Catz, chief financial officer of Oracle, in the earnings press release. “Strong organic growth in our software business coupled with a focus on the highly profitable engineered systems segment of our hardware business enabled a Q2 non-GAAP operating margin of 47%”. The company has managed to expand its margins above Wall Street’s estimate of 45.9 percent by focusing on more profitable systems packaged with deals with its databases and applications software.

Ross MacMillan, an analyst at Jefferies & Co, said that Oracle’s results are good news for other business software developers, many of which end their fiscal quarters on 31 December.
**Oracle’s M&A**
Co-President Mark Hurd said software and new license sales in Europe received a boost from the addition of 3,000 salespeople and the “strong M&A” period. Oracle has been sitting on some $13.4 billion (£8.24 billion) of free cash flow over the past four quarters – enough firepower to carry on with its shopping spree. According to Forbes, the company’s list of acquisitions include RightNow, Vitrue, Endeca, Taleo and most recently Collective Intellect, a social media monitoring firm.

!m[Company Delivers Great Results Shrugging Off Fiscal Cliff Worries](/uploads/story/1060/thumbs/pic1_inline.png)
Larry Ellison, chief executive officer of Oracle, sought to defend the $7.5 billion (£4.61 billion) takeover of Sun Microsystems three years ago as the unit has proven hard to assimilate and is responsible for the company’s continuing sales declines. Mr Ellison called Sun one of the most profitable buys Oracle has ever made, referring to the unit’s contribution to the development of Java software and high-end hardware such as the Sparc SuperCluster and Exadata products. “Sun technology enabled Oracle to become a leader in the highly profitable engineered system segment of the hardware business.” Mr Ellison said. According to him hardware sales will end their two-year decline in the fourth quarter of this fiscal year ending in May.

**Oracle Stock – Good Buy?**
Richard Saintvilus, a contributor for Forbes magazine, sees the stock as a good buy. According to him Oracle has a track record of strong growth following smart acquisitions and with the recent purchases it has expanded its reach across various industries with expertise in data analytics, human resources, clinical trials and even social media. A number of factors are depressing the stock price but none of them are related to the company’s fundamentals.
Yesterday Oracle’s share price rose 1.73 percent in regular trading and an additional 1.28 percent to $33.30 in afterhours trading. Most conservative growth projections suggest a fair market value of around $35.

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