Oracle reported strong fourth quarter earnings as database and application sales surged, but hardware system revenue was a bit light relative to expectations.
The company reported fourth quarter earnings of US$3.2 billion, or US$0.62 cents a share, on revenue of US$10.8 billion, up 13 per cent from a year ago. Non-GAAP earnings were US$0.75 cents a share. Wall Street was expecting earnings of US$0.71 cents a share on revenue of US$10.75 billion.
Hardware revenue was below expectations, but Oracle's core software sales performed well. New software licence revenue in the fourth quarter was up 19 per cent from a year ago to US$3.7 billion. Software update and product support revenue was up 15 per cent to US$4 billion. Hardware system revenue was down 6 per cent to US$1.2 billion. Barclays Capital analyst Israel Hernandez projected hardware sales of US$1.29 billion for the fourth quarter. Collins Stewart analyst projected hardware revenue of US$1.35 billion in fourth quarter hardware revenue.
On a conference call with analysts, Oracle CEO Larry Ellison played down hardware worries because falling sales means commodity systems are disappearing. Why? Oracle is transitioning to higher end systems that happen to have database and application licence and maintenance revenue attached to them. "As Exadata and Exalogic becomes largest part of overall base that improves our profitability," said Ellison. "We sell more engineered systems and it's an enabler that increases our rate of sales for our middleware because it runs better. We sell more database software because of Exadata. It's a virtuous circle."
Safra Catz, Oracle president and CFO, touted the company's organic growth, a notable point given the software outfit has typically been a serial acquirer of rivals. Catz said:
In Q4, we achieved a 19 per cent new software licence growth rate with almost no help from acquisitions. This strong organic growth combined with continuously improving operational efficiencies enabled us to deliver a 48 per cent operating margin in the quarter.
On a conference call with analysts, Catz projected non-GAAP first quarter earnings of US$0.45 cents a share to US$0.48 cents a share with revenue growth of 10 per cent to 13 per cent. Wall Street was expecting US$0.46 cents a share.
Oracle president Mark Hurd said the company had more than 1000 Exadata and Exalogic systems installed worldwide. The goal for fiscal 2012 is to triple that system count.
For fiscal 2011, Oracle reported earnings of US$8.5 billion, or US$1.67 a share, on revenue of US$35.6 billion, up 33 per cent from a year ago.
By the numbers:
- Database growth was strong and CEO Larry Ellison said Oracle was focused on so-called big data crunching. Database and middleware revenue for the fourth quarter was US$5.35 billion, up 17 per cent from a year ago.
- Applications revenue was US$2.34 billion in the fourth quarter, up 18 per cent from a year ago. New software licence revenue for applications was up 22 per cent from a year ago to US$1.04 billion.
- 35 per cent of revenue was new software licences with 36 per cent of sales deriving from support and maintenance.
- Hardware system revenue was 17 per cent of sales. Of that sum, 6 per cent of revenue came from support.
- Cloud services revenue was US$367 million in the fourth quarter.
- In the fourth quarter, America's revenue was US$5.48 billion followed by Europe, Middle East and Africa at US$3.56 billion and Asia Pacific at US$1.72 billion.
- Oracle ended its fiscal year with 108,429 employees.
Via ZDNet US