Analyst Conference Summary

Oracle
ORCL

conference date: June 25, 2008 @ 2:00 PM Pacific Time
for quarter ending: May 31, 2008 (4th quarter fiscal 2008)


Forward-looking statements

Overview: Strong acquisition-based growth continues.

Basic data (GAAP) :

Revenues were $7.2 billion, sequentially up 36% from $5.3 billion and up 24% from $5.8 billion year-earlier.

Net income was $2.04 billion, up 54% sequentially from $1.3 billion and up 25% from $1.60 billion year-earlier.

EPS (earnings per share) were $0.39, up 50% sequentially from $0.26 and up 26% from $0.31 year-earlier.

Guidance:

Q1 fiscal 2009, first full quarter with BEA. Q1 is typically sequentially down. New software license revenue up 10-20% y/y. 18-20% increase in overall revenue y/y. Non-GAAP EPS $0.26 or $0.27. GAAP EPS $0.17 to $0.18. 29.9% tax rate. Results could fluctuate with curency exchange rates.

Conference Highlights:

"This is the third consecutive year we've taken applications market share from SAP." Highest license growth rate in any fiscal year in a decade. Our strategy is to remain number 1 in database and gain market share elsewhere, we can do that because we have better technology. Middleware business offers a complete suite based on industry standards, which differentiates us from IBM and Microsoft. In applications we compete based on modern internet standards, as opposed to SAP proprietary technology. Leading indicators of future pipeline growth are pointed in the right direction.

Software revenues were up 26% to $6 billion. New software license revenue was up 27% to $3.14 billion, with database and middleware new license revenue up 23%. Applications new license revenues were up 36%. Revenue from software license updates and product support was $2.83 billion. Services revenue was $1.3 billion, up 18%.

Non-GAAP numbers: net income $2.4 billion, up 27% y/y. EPS $0.47, up 27%. Operating margins 43.0%, a record and up 2% from year-earlier.

According to CEO Larry Ellison, "During the past four years we exceeded our plan and delivered a non-GAAP EPS compound annual growth rate of over 26%."

Operating expenses were $4.27 billion, including $1.53 billion for sales and marketing, $269 million for license updates and product support, $1.07 billion for cost of services, $733 million for research and development, $201 million general and administrative, $344 million amortization of intangibles, $96 million acquisition related expense and $27 million restructuring expense.

Operating income was $2.97 billion. Interest expense was $130 million. Non-operating income was $101 million. Income tax provision was $905 million.

BEA contributed $93 million to new software license revenue, higher than our expectations.

Customer retention rates are at a new all time high.

$7.4 billion operating cash flow for full fisc

Share buy backs: 24 million shares at $20.76 per share.

Q1 comparisons will be tough, since last year showed 35% growth. Could be affected by macroeconomic environment.

Per IDC, Oracle had 44.3% of database market in 2007.

BI (business intelligence) product sales doubled during the year. Our BI plaform is the same our applications use. Picked up big wins in this area.

Formed global business units for health sciences and insurance.

Q&A:

Rebound in the Americas and applications segment? Felt confident in March about North America. We have extremely strong pipelines in Americas and globally for fiscal Q1.

U.K or Europe? We are not seeing a market slowdown from our pipeline numbers. If there are issues they would not appear until the end of the quarter.

Can you continue 20% earnings growth rate for next 3 years? Our strategy is not running out of gas. Our model has a lot of leverage in it. Our expanding product line is very synergistic. We are very optimistic long term. Our model also has enormous margin leverage. We benefit from economies of scale.

We were using cautious closure rates in Q3 for our guidance. Now we are back to using our regular closure rates, so our guidance is right down the middle.

Are deals becoming more modular? There are still large deals out there, people are more cautious, but we have more applications they may want to include in deals.

Asia market? We could have executed better in Asia. We have made some management changes and BEA should help us in middleware. There is not a lack of market demand.

Fusion products? Some have already been introduced and more are on the way.

On demand business? We are the second largest on demand provider, behind Salesforce.com. The fourth quarter was the first time we made money. Salesforce makes very little in profits. We need to increase profitability before we scale the business.

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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 2008 William P. Meyers