10-QPeriod: Q2 FY2009

ORACLE CORP Quarterly Report for Q2 Ended Nov 30, 2008

Filed December 22, 2008For Securities:ORCLORCL-PD

Summary

Oracle Corporation's 10-Q filing for the period ending November 30, 2008, indicates a period of robust growth driven by acquisitions and strong performance in its software segments. Total revenues increased compared to the prior year, with software license updates and product support showing particular strength, contributing significantly to the company's overall margin. While new software license revenues saw a slight decline in reported currency, this was offset by growth in database and middleware products, suggesting resilience in core offerings. The company's services segment experienced modest growth, but at lower margins. Oracle continued its active acquisition strategy, notably the acquisition of BEA Systems, which impacted the company's financial statements through goodwill and intangible asset amortization. Despite the positive revenue trends, the company faced challenges including unfavorable foreign currency fluctuations and increased operating expenses related to acquisitions, personnel, and amortization. Financially, Oracle maintained a strong liquidity position with substantial cash, cash equivalents, and marketable securities, supporting its ongoing operations, strategic acquisitions, and significant share repurchase program. The company also highlighted its ongoing commitment to research and development to maintain its competitive edge in the enterprise software market. Investors should note the company's strategic focus on integrating acquisitions and managing operating expenses while continuing to innovate and expand its product and service offerings in a challenging economic environment.

Financial Highlights

28 data points
Beta

Revenue

$5.61B

Net Income

$1.30B

23.1% Net Margin

EPS (Diluted)

$0.25

Cash & Equivalents

$7.35B

Free Cash Flow

$750.00M

Financial Statements
Beta
Revenue$5.61B
Operating Expenses$3.63B
Operating Income$1.98B
Interest Expense-$157.00M
Net Income$1.30B
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)5.13B
Shares Outstanding (Diluted)5.19B

Key Highlights

  • 1Total revenues for the six months ended November 30, 2008, increased by 11% to $10.94 billion compared to the same period in the prior year.
  • 2Software revenues, comprising new software licenses and updates/support, grew 13% year-over-year for the six-month period, demonstrating strength in Oracle's core business.
  • 3Software license updates and product support revenues showed robust growth, increasing 19% year-over-year for the six-month period and maintaining high margins (84%).
  • 4The acquisition of BEA Systems in fiscal 2008 significantly impacted the balance sheet, contributing substantially to goodwill and intangible assets.
  • 5Operating expenses increased by 9% year-over-year for the six-month period, driven by higher amortization of intangible assets, sales and marketing expenses, and stock-based compensation, largely due to acquisitions.
  • 6The company maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $10.65 billion as of November 30, 2008.
  • 7Oracle continued its aggressive stock repurchase program, spending $2.5 billion in the first half of fiscal 2009, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Oracle reported an 11% increase in total revenues for the six months ended November 30, 2008, reaching $10.94 billion, up from $9.84 billion in the prior year. This growth was primarily driven by its software business, particularly software license updates and product support, which saw a 19% increase. New software license revenues also grew, albeit at a slower pace, bolstered by strong performance in database and middleware products.

Oracle's acquisition strategy, notably the purchase of BEA Systems in fiscal 2008, significantly impacted its financial statements. This resulted in a substantial increase in goodwill and intangible assets on the balance sheet. Consequently, amortization of these acquired intangible assets led to a notable increase in operating expenses.

Oracle maintained a strong financial position with $10.65 billion in cash, cash equivalents, and marketable securities as of November 30, 2008. The company's operating activities generated significant cash flow ($3.99 billion for the six months ended November 30, 2008). Oracle also actively returned capital to shareholders through a robust share repurchase program, spending $2.5 billion in the first half of fiscal 2009, and indicated its ability to fund future acquisitions and operations through its substantial liquidity.

Oracle noted that the global economic crisis could negatively impact its business through delayed or reduced customer spending, potential issues with customer payments, and increased market volatility affecting its investment portfolio. Additionally, unfavorable foreign currency fluctuations presented a challenge, reducing reported revenue growth by several percentage points. The company also faces ongoing legal proceedings, though it stated it believes it has meritorious defenses and that the outcomes are unlikely to have a material adverse effect.