10-QPeriod: Q1 FY2009

ORACLE CORP Quarterly Report for Q1 Ended Aug 31, 2008

Filed September 22, 2008For Securities:ORCLORCL-PD

Summary

Oracle Corporation's (ORCL) 10-Q filing for the period ending August 31, 2008, demonstrates robust financial performance driven by strong revenue growth across its software and services segments. Total revenues saw a significant increase of 18% year-over-year, reaching $5.33 billion, with software revenues up 20% and services revenues up 9%. This growth was supported by a combination of organic demand for its core database and middleware products, a strong performance in software license updates and product support, and the impact of strategic acquisitions, most notably BEA Systems, Inc. The company's profitability also improved, with operating income rising by 25% to $1.52 billion. This was achieved despite increased operating expenses, which were up 15%, largely due to higher personnel costs, increased amortization of intangible assets from recent acquisitions, and integration-related expenses. Oracle maintained a healthy operating margin of 29%, reflecting its efficient cost structure and the high-margin nature of its software support business. The company also reported a significant increase in cash from operations, highlighting its strong cash-generating capabilities.

Financial Highlights

28 data points
Beta

Revenue

$5.33B

Net Income

$1.08B

20.2% Net Margin

EPS (Diluted)

$0.21

Cash & Equivalents

$8.55B

Free Cash Flow

$3.24B

Financial Statements
Beta
Revenue$5.33B
Operating Expenses$3.81B
Operating Income$1.52B
Interest Expense-$159.00M
Net Income$1.08B
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)5.15B
Shares Outstanding (Diluted)5.24B

Key Highlights

  • 1Total revenues increased 18% year-over-year to $5.33 billion.
  • 2Software revenues grew 20% to $4.17 billion, driven by new software licenses and product support.
  • 3Services revenues increased 9% to $1.16 billion.
  • 4Operating income rose 25% to $1.52 billion, with operating margin improving to 29%.
  • 5Net income increased to $1.08 billion, resulting in diluted EPS of $0.21, up from $0.16 in the prior year.
  • 6Cash provided by operating activities increased 20% to $3.24 billion.
  • 7The company continued its share repurchase program, repurchasing approximately 22.7 million shares for $500 million during the quarter.

Frequently Asked Questions

The acquisition of BEA Systems, Inc., completed in April 2008, had a significant impact. It contributed to the growth in new software license revenues and software license updates and product support revenues. However, it also led to an increase in operating expenses, primarily due to the amortization of acquired intangible assets, including approximately $4.4 billion of goodwill and $3.3 billion in identifiable intangible assets.

Oracle's software business, comprising new software licenses and updates/support, performed strongly, with revenues up 20% to $4.17 billion. The services business, including consulting, On Demand, and education, saw a more modest increase of 9% to $1.16 billion. The software segment continues to be the primary driver of both revenue and profit.

Oracle maintains a strong liquidity position. Cash, cash equivalents, and marketable securities increased to $13.02 billion. The company generated $3.24 billion in cash from operating activities and has sufficient resources to meet its working capital, capital expenditures, and contractual obligations. Oracle also indicated its ability to fund future acquisitions and stock repurchases.

Oracle is involved in several legal proceedings, including a securities class action lawsuit, intellectual property litigations (Mangosoft, EpicRealm, SAP), and other matters arising in the ordinary course of business. While the company believes it has meritorious defenses and that the outcome of these matters will not have a material adverse effect on its financial position or results of operations, these remain ongoing risks.