Analyst Conference Summary

conference date: June 24, 2010 @ 2:00 PM Pacific Time
for quarter ending: May 31, 2010 (fourth quarter fiscal 2010)

Forward-looking statements

Overview: Sun acquisition adds not just revenues, but profits. Who would have thought?

Basic data (GAAP) :

Revenues were $9.51 billion, up 49% sequentially from $6.40 billion and up 39% from $6.86 billion in the year-earlier quarter.

Net income was $2.36 billion, up 98% sequentially from $1.19 billon and up 25% from $1.89 billion year-earlier.

EPS (earnings per share) were $0.46, up 100% sequentially from $0.23 and up 25% from $0.38 year-earlier.

Guidance:

For fiscal Q1 2011 GAAP EPS is expected between $0.17 and $0.18, with non-GAAP EPS between $0.35 and $0.37. Believes guidance is conservative, assuming exchange rates stay near current levels. 41 to 45% y/y revenue growth. Tax rate 33% GAAP is assumed.

Conference Highlights:

Execution was beeter than expected, leading to a non-GAAP operating margin of 46%. Sun acquisition contributed over $400 million to non-GAAP operating income. "We have increased confidence that we will meet or exceed our goal of Sun contributing $1.5 billion to non-GAAP operating inocme in fiscal 2011." Foreign exchange rates were not a major factor in the quarter; slightly beneficial. "Business is extemely healthy."

Oracle continues to take market share from SAP. Exadata database machine is taking market share from IBM.

New software license revenue was $3.14 billion, up 14% y/y. Within that applications contributed $855 million, up 6% y/y. Software updates and support revenue was $3.43 billion, up 12% y/y.

Hardware systems revenues were $1.83 billion, which is new due to Sun acquisition.

Services revenue was $1.11 billion, up 4% y/y.

Non-GAAP EPS was $0.60 up 30% y/y. $4.4 billion operating income.

10 million shares repurchased, average price $24.95, for $250 million.

$18.5 billion in cash and investments at end of quarter.

GAAP Operating expenses of $6.21 billion included sales and marketing expense of $1.74 billion; R&D of $1.06 billion; general and administrative $293 million; software and hardware support $598 million; hardware product costs of $675 million; services $969 million; amortization of intangibles $605 million; acquisition related $103 million, and restructuring expense of $154 million. Leaving operating income of $3.30 billion (GAAP). Non-operating expense was $225 million. Income tax provision $711 million.

Exadata machine was originally for data warehousing. Second generation expanded to online transaction processing. Current generation outperforms IBM servers, so pipeline is growing rapidly.

Q&A:

Europe macroeconomics? We did very well in Europe despite a tough y/y compare. So far we are off to a good start for this quarter, but customers could be affected.

Operating margins? You know when we sell a lot more software we do not increase expenses much, so that is the main source of increased margins. Hardware margins will also improve with scale.

Hardware segment profits? We do need to get a baseline for the hardware business. We have differentiated products out, and more are coming out. We believe we can do our guidance, but we will need a year to understand seasonality in our hardware business, since we took out Sun's low margin products. People love Sun hardware and are more comfortable knowing Oracle can take these products into the future.

We plan to more than double the Sun sales force.

Sun maintenance trends? We announced new pricing which was well received. Many customers then came back to Sun for support.

Customer willingness to spend? We don't know how our company-specific momentum reflects the overall software market. Our customers are happy right now and are investing in our products.

We did not eliminate the Sun channel. We said we are working on changing the direct to channel ratio to the higher direct share that we traditionally have at Oracle.

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