"But for currency, we sold more in licenses than we did in Q3 of last year...We are still able to grow ahead of our plan," crowed Larry Ellison, Oracle's CEO on today's earnings call.
An upbeat Oracle executive team reported numbers at the high end of guidance for the third quarter ended February 28th but laid heavy emphasis on the recent strengthening of the USD against other major currencies as a mitigating factor in the reported figures. Going forward, the company believes that revenues for Q4 will be off 5-15% at constant currencies which, when currency impact is taken into account could be as high as -27%. Even so and as what I believe to be a sop to the investor community, it threw out a 5¢ dividend - the first in the company's history.
See also: Larry Dignan has the detailed numbers analysis
Safra Catz, Oracle's CFO said: "The company is extremely confident in its business model" and while she would not be directly drawn, added: "We're on track to do over 50% (operating margin), for sure." This plays against the current margin of 46% which is largely earned from Oracle achieving $2 in maintenance revenue for every $1 of license sale.
How is Oracle able to do this when others are struggling for margin? Operating efficiencies from acquisitions should be a no-brainer, but Oracle has demonstrated rare skill in managing its acquisitions very well. The breadth of portfolio means it has plenty to offer the market and as president, Charles Phillips observed: "Infrastrucutre offerings are much easier in tough environments" compared to database and applications.
Even so, I find it extraordinary that customers continue to allow Oracle such high margins. Yesterday, I noted from Forrester that audit may provide an avenue for extracting more license (and hence maintenance) revenues. But that might backfire in light of what Forrester has uncovered and the growing number of third party maintenance providers in play. Tune in again around mid-June to see if customers have been paying attention.