Analyst Conference Summary

Oracle
ORCL

conference date: December 16, 2010 @ 2:00 PM Pacific Time
for quarter ending: November 30, 2010 (second quarter fiscal 2011)


Forward-looking statements

Overview: Another solid quarter, with y/y gains driven by acquisitions and organic growth.

Basic data (GAAP) :

Revenues were $8.58 billion, up 14% sequentially from $7.50 million and up 47% from $5.86 billion in the year-earlier quarter.

Net income was $1.87 billion, up 39% sequentially from $1.35 billion and up 29% from $1.45 billion year-earlier.

EPS (earnings per share) were $0.37, up 37% sequentially from $0.27 and up 28% from $0.29 year-earlier.

Guidance:

Q3 2011 total revenue growth 31% to 35% non-GAAP. Non-GAAP EPS $0.48 to $.50 at current exchange rates. GAAP EPS $0.34 to $0.36 at current exchange rates.

Conference Highlights:

Record non-GAAP EPS. Negative 2% currency affect on revenue, but beat high end of guidance. Strength was very broadly based.

Goal is to become number 1 in high end transaction processing and data warehousing server business with Exadata. Trashed HP servers as slow and expensive. IBM more competitive, but significantly slower. The Exadata pipeline is now over $2 billion. Expects to become number 2 behind IBM very, very soon. Exalogic will be available next quarter.

New software license revenue was $2.00 billion, up 21% y/y. Americas up 32%, EMEA up 5%, Asia up 21%. Fusion middleware sales led the way. Took share from SAP.

Software license updates and product support revenue was $3.65 billion, up 12% y/y. Attach and renewal rates continue at high levels.

Hardware systems revenues were $1.75 billion; these are new revenues from the Sun acquisition. Gross margins improved.

Services revenues were $1.19 billion, up 24% y/y.

Operating margins: 32% GAAP, 44% non-GAAP. Could be back at pre-Sun operating margins fairly quickly.

Non-GAAP EPS were $0.51. $3.8 billion operating income.

Total operating expenses were $5.81 billion, leaving operating income of $2.77 billion. Interest expense was $214 million. Other income $90 million. Income tax provision $776 million.

5 cent dividend declared for investors of record on January 19, 2011, paid on February 9, 2011.

9.1 million shares for $250 million were repurchased. $24.8 billion cash and investments at end of quarter.

Q&A:

Any halo impact on Exadata? Close rates? Close rates are improving, expect a jump in Exadata sales in Q3. Customers trying small machines because it is a new product. When you buy these high end servers, you are typically buying to run specific software. HP does not have the software.

Exalogic feedback, ramp expectations? Launch should be helped by success of Exadata. 50% cost-performance benefit from Exalogic.

Fusion middleware color? We built a unified middleware architecture. You can buy a piece at a time, but all the suite pieces work together. Compare to IBM WebSphere which has multiple parts with multiple patches.

Europe, particularly applications spending? We are doing well there, on a broad basis, the good revenues were not do to a single deal. We have been gaining market share there for years.

Are Exadata sales displacing competitors? About 70% we are displacing, about 30% consolidation. About 35% of Exadata customers have made a second purchase from us.

Margins? The only non-repeatable thing was a $120 million legal fee settlement. In general, margins should hold up and ramp up as growth continues.

Database success? Our technology is getting faster and more secure faster than our competitors.

Believes all the factors discussed will meaning continue growth of market share against HP, IBM, and SAP.

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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 2010 William P. Meyers