Analyst Conference Summary


conference date: March 20, 2007
for quarter ending: February 28, 2007 (3rd quarter fiscal 2007)

Forward-looking statements

Overview: Revenue and earnings growth accelerated during the quarter; "exceeded guidance on every metric." Strong guidance for fiscal Q4.

Basic data:

Revenues were $4.4 billion, up 6% sequentially from $4.16 billion and up 27% from the year-earlier quarter.

Net income was $1.03 billion, up 35% from year-earlier.

Earnings per share were $0.20.

Non-GAAP net income was $1.3 billion, up 30% from year-earlier. Non-GAAP earnings per share were $0.25, up 31% from year-earlier.

Cash and equivalents including marketable securities ended at $6.44 billion.


Q4 2007: Hyperion acquisition not included (it has not closed yet, will not have much impact on Fiscal Q4). Q4 is typically seasonally strongest. New software licenses 5 to 15% year-over-year; 11 to 15% year over year GAAP revenue increase (10 to 14% non-GAAP). $0.34 non-GAAP EPS. GAAP EPS $0.30. Assumes 28.2% tax rate and steady exchange rate. Assumes $50 million stock option compensation.

Conference Highlights:

Software revenues were $3.5 billion, up 25% compared to year-earlier. That included $1.4 billion in new software licenses and $2.1 billion in license updates and product support. Services revenue was $916 million, up 36% year-over-year.

Growing much faster that BEA and SAP. Middleware revenue grew 82% compared to 8% with BEA; now larger than BEA. Fastest growing third quarter in over 5 years. Rumors of megadeals in quarter are not true. Even excluding Siebal new license revenues were up 32%. Highest license renewal rate in history.

39% operating margins. Expect margins to benefit from increased scale over next few quarters.

Operating expenses totaling $3.0 billion consisted of: sales and marketing $967 million; product support $210 million; cost of services $820 million; R&D $570 million; general and administrative $175 million; intangible amortization $222 million; restructuring $3 million; acquisition-related expense $53 million.

Deferred revenues ended at $2.95 billion. Long-term debt was $5.7 billion. Capital expenditures were $183 million.

Tax rate was positively impacted by R&D tax credit. Bought back 58 million shares for about $1 billion.

Linux support business off to a solid start. Replaced Red Hat at Yahoo.

Applications business is in a battle for marketshare with SAP. Oracle's strategy is Fusion, or one ERP suite across the board. Number 1 in CRM, which is growing faster than ERP. Expanding into industry-specific software suites. Result is margins are going up with growth. Banking and retail segments did great. Pipelines for telecoms and utilities. 57% growth year-over-year; gained market share from SAP. BI (Business Intelligence) tripled in quarter.


Cause of new license sale strengths? Last quarter was the anomalous quarter, with execution issues in North America. Just getting back on track.

Enterprise spending trends? Has so much momentum, especially in vertical industries, looks very upbeat.

Middleware color? Key decision was to sell integrated suite rather than separate components. Product is based on industry standards.

Pipelines? Very big; bigger than last year. Guidance assumes modestly lower close rates that last year.

Vertical expansion? Expands mainly by buying industry leaders. Wants to enter new industries in number 1 position.

Color on application success? Oracle provides confidence to potential customers who hesitated to use smaller companies; completeness of offering also important, for example with telecos.

Got a higher renewal rate with new PeopleSoft release than PeopleSoft had as an independent company. Customers were impressed by commitment and quality. Same with JD Edwards products and Siebal. Will continue to support existing product lines.

Hyperion effect on margins? Expect it to improve margins.

Does not want to grow own services business fast; want to concentrate on license sales. But iFlex is growing fast.

ERP and database businesses are large but slow growing. CRM, middleware, applications are growing rapidly.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers