Oracle misses Q1 revenue mark but lands above EPS estimate

UPDATED: Before Oracle can get to its big powwow in SF next week, it's time to check the balance sheet first.
Written by Rachel King, Contributor on

With OpenWorld about to kick off in a few days combined with the end of the tumultuous (and sometimes controversial) America's Cup wrapping up this week, it's a busy time at Oracle, to say the least.

Expectations weren't high as far as the balance sheet was concerned this week as the hardware and software giant reported first fiscal quarter earnings on Wednesday after the bell.

The Redwood Shores, Calif.-based company reported a net income of $2.2 billion, or 47 cents per share (statement).

Non-GAAP earnings were 59 cents per share on a revenue of $8.37 billion.

Wall Street was expecting Oracle to report first quarter earnings of 56 cents a share on revenue of $8.48 billion.

CFO Safra Catz attempted to sway the spotlight to EPS -- rather than the missed revenue mark -- in prepared remarks:

Non-GAAP earnings per share increased 12% to $0.59, the best ever result for the first quarter of our fiscal year. Those record level earnings were enabled by an operating margin of 45% for the quarter. We also set a free cash flow record of over $6 billion in Q1, and then we returned half of that to our stockholders by repurchasing $3 billion of our shares in the quarter.

Oracle leadership stressed that revenue and earnings results would have been higher if it weren't for "the impact of the US dollar strengthening compared to foreign currencies."

President Mark Hurd touted a record quarter for engineered systems with more than 60 percent growth in sales, sequentially.

Revenue for new software licenses and cloud software subscriptions were also up by four percent to $1.7 billion on a non-GAAP basis.

Looking forward, CEO Larry Ellison offered a sneak peek as to what can be expected at OpenWorld 2013, which kicks off in San Francisco on Sunday.

Following the cloud build-up last year, the theme next week will be the In-Memory Option for the Oracle database, according to Ellison.

Virtually every existing application that runs on top of the Oracle database will run dramatically faster by simply turning on the new In-Memory feature. Our customers don't have to make any changes to their applications whatsoever; they simply flip on the in-memory switch, and the Oracle database immediately starts scanning data at a rate of billions or tens of billions of rows per second.

For the second quarter, Wall Street is looking for Oracle to deliver revenue of $9.41 billion with non-GAAP earnings of 69 cents per share.

UPDATE: During the conference call this afternoon, Catz said Oracle expects Q2 revenue to increase by one to four percent while earnings are projected to fall between 65 to 70 cents per share, both in "constant dollars."

Despite an uptick when the earnings report dropped after the bell, Oracle shares started to decline in after-hours trading amid a weak outlook.

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