Oracle – on which as many fortunes hang these days as depended on its ancient namesakes – came in with fiscal Q3 earnings down 10% year-over-year at $1.2 billion, or 23 cents a share, Thursday on revenues up 17% to $6.47 billion.
The revenues beat Wall Street estimates of $6.34 billion as did Oracle’s non-GAAP earnings, which were up 9% to $1.9 billion, or 38 cents a share, a penny better than consensus. Evidently enterprise spending is coming back.
Oracle said its all-important new software license revenues were up for a second quarter in a row, this time by 13% to $1.7 billion – higher than expected – and up 10%, beating guidance, to $1.7 billion excluding Sun, which it finally acquired on January 26. Without Sun, it said, its total GAAP revenue was up 7%.
Oracle’s database and middleware revenue was up 11% to $1.24 billion. Applications new licenses were up 21% to $477 million.
Software license updates and product support revenues were up 13% to $3.3 billion. Oracle’s operating income was down 5% to $1.8 billion, and its operating margin was 29%, impacted by Sun.
Oracle gave some credit to expense management for its results.
Oracle president Safra Catz, responsible for getting the Sun deal closed despite EC resistance, said, “Sun integration is going even better than we expected. We believe that Sun will make a significant contribution to our fourth-quarter earnings per share as well as meet the profitability goals we set for next year.”
Oracle figures Sun is a curiosity that draws crowds and that it can now get an audience with any CIO. A recent CIO meeting brought in 50 more than the 125 invited; most had to travel and 91% were new.
Oracle’s other president Charles Phillips said Exadata – Oracle’s now Sun-base warehouse appliance – “is the fastest growing product in Oracle’s history. Introduced a little over a year ago, the Exadata pipeline is now approaching $400 million with Q4 bookings forecast at nearly $100 million. This strengthens both sales growth and profitability in our Sun server and storage businesses.”
And they laughed when Oracle said it would use Sun to go into the hardware business. Oracle is using Exadata like a stick to beat IBM about the head and shoulders, claiming it’s better than anything IBM’s got.
Hardware revenue from Sun came to $458 million, 7% of revenue. Total contribution was $596 million, better-than-expected. Customers are supposedly responding to the acquisition. Oracle is refusing to sell Sun products at a loss – like those great HPC deals that caused Sun to bleed – and is dropping third-party products like Hitachi storage that Sun distributed, preferring to stick with Sun’s own IP. It said it was not canceling Sun products and is hiring “aggressively” for Sun, paying on net, not gross.
Apparently Oracle got a deal with one of the hush-hush military agencies for Sun Rays that promises to require lots of units over time.
More support for Sun products is required, it said, especially apparently for the channel.
CEO Larry Ellison claimed, as he is wont to do, market share gains against rival SAP. “SAP’s most recent quarter,” he said, “was the best quarter of their year, only down 15%, while Oracle’s application sales were up 21%. But SAP is well ahead of us in the number of CEOs for this year, announcing their third and fourth, while we only had one.”
Larry predicted dire consequences for SAP and its 25-year-old proprietary technology against Oracle’s soon-to-be Fusion-based rewrite of all its applications. He claimed SAP’s customers are “nervous” and that the company can’t make any money selling its long-delayed Business ByDesign on-demand software to companies with less than 100 people with a different sales force. It’s a “distraction,” he said.
With SAP down double digits and Oracle’s “stunning” returns in database, middleware and applications, “No wonder SAP is so unhappy,” he said, playing on SAP’s recent explanation for why it fired its last CEO.
Catz predicted that Oracle’s total revenues this quarter – Sun’s first full quarter as part of Oracle – would be up 35%-40% to $9.3 billion-$9.6 billion, with non-GAAP earnings of 52 cents- 56 cents a share. Revenue from new licenses is supposed to be up 3%-13%. She called the forecast “conservative,” hard apparently on conservative.