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Oracle has strong Q1 despite hardware lag

Oracle delivered a better-than-expected first quarter, but hardware revenue came in at the low end of expectations.

Oracle delivered a better-than-expected first quarter, but hardware revenue came in at the low end of expectations.

Oracle reported first quarter earnings of US$1.8 billion, or 36 cents a share, on revenue of US$8.4 billion, up 12 per cent from a year ago. Non-GAAP earnings were 48 cents a share.

Wall Street was expecting Oracle to report first quarter earnings of 46 cents a share on revenue of US$8.35 billion. The first quarter is typically Oracle's weakest as it sets its fiscal 2012 plans into motion.

Oracle didn't provide its guidance in the statement, but will provide an outlook on its conference call. Wall Street is expecting second quarter earnings of 56 cents a share on revenue of US$3.58 billion.

As expected by many analysts, Oracle's software revenue — applications, middleware and databases — was solid, but hardware sales lagged.

  • New software licence revenue in the first quarter was up 17 per cent to US$1.5 billion
  • Software licence updates and support revenue was US$4 billion in the first quarter, up 17 per cent from a year ago
  • Hardware revenue was down 5 per cent in the first quarter to US$1 billion. Oracle had projected hardware revenue between US$1.03 billion and US$1.1 billion excluding support.

Safra Catz, Oracle president and CFO, said the company boosted its operating margins via organic growth and "disciplined business management".

Oracle president Mark Hurd noted that high-end server sales led by Exadata and Exalogic showed double-digit revenue growth in the first quarter, but low-end server sales tanked. Hardware gross margins jumped to 54 per cent in the first quarter, but Oracle isn't growing its overall hardware revenue footprint. Analysts, however, expect Oracle to launch an "Exadata mini" at OpenWorld.

Larry Ellison, CEO of Oracle, touted a new SPARC chip to be launched next week along with a new SPARC SuperCluster server. The upshot is that Oracle is on board with high-end servers and appears willing to cannibalise share.

By the numbers:

  • Database and middleware revenue in the first quarter was US$478 million, up 7 per cent from a year ago, with applications bringing in US$249 million in sales, up 18 per cent
  • Hardware support revenue in the first quarter was up 8 per cent to US$645 million
  • Services revenue was US$1.18 billion, up 14 per cent from the first quarter a year ago
  • Revenue in the Americas was US$4.23 billion in the first quarter. Europe, Middle East and Africa sales were US$2.7 billion in the first quarter and Asia Pacific sales checked in at US$1.44 billion
  • Oracle ended the quarter with 109,388 employees.

Via ZDNet US