10-QPeriod: Q1 FY2010

ORACLE CORP Quarterly Report for Q1 Ended Aug 31, 2009

Filed September 21, 2009For Securities:ORCLORCL-PD

Summary

Oracle Corporation's Form 10-Q for the period ending August 31, 2009, highlights a period of revenue contraction offset by improved operating efficiency. Total revenues decreased by 5% year-over-year to $5.05 billion, primarily driven by a 14% decline in new software license revenues, even on a constant currency basis. However, software license updates and product support revenue saw a modest increase of 6% (11% constant currency), indicating strong customer retention. Total operating expenses decreased by 13% (9% constant currency), leading to a significant increase in operating income by 14% to $1.74 billion and a higher operating margin of 34%. The company also saw a substantial increase in cash and cash equivalents, bolstered by a $4.5 billion senior note issuance. The proposed $7.4 billion acquisition of Sun Microsystems remained a key strategic focus, pending regulatory approval.

Financial Highlights

51 data points
Beta

Revenue

$5.05B

100.0% Gross Margin

Net Income

$1.12B

22.2% Net Margin

EPS (Diluted)

$0.22

Total Assets

$53.00B

Cash & Equivalents

$16.10B

Free Cash Flow

$3.74B

Financial Statements
Beta
Revenue$5.05B
Cost of Revenue$0
Gross Profit$5.05B
Operating Expenses$3.31B
Operating Income$1.74B
Interest Expense$179.00M
Net Income$1.12B
EPS (Basic)$0.22
EPS (Diluted)$0.22
Shares Outstanding (Basic)5.01B
Shares Outstanding (Diluted)5.06B

Key Highlights

  • 1Total revenues declined 5% to $5.05 billion, with new software license revenue down 17% (14% constant currency).
  • 2Software license updates and product support revenue increased 6% to $3.12 billion (11% constant currency), showcasing strong customer retention.
  • 3Operating expenses decreased by 13% to $3.31 billion, leading to a 14% increase in operating income to $1.74 billion and a higher operating margin of 34%.
  • 4The company issued $4.5 billion in senior notes in July 2009, contributing to a significant increase in cash and cash equivalents to $16.1 billion.
  • 5Cash flow from operations improved by 15% to $3.74 billion.
  • 6The proposed acquisition of Sun Microsystems for approximately $7.4 billion was a key strategic development, awaiting regulatory clearance.
  • 7Earnings per share (diluted) remained steady at $0.22 for both periods, indicating effective cost management despite revenue pressures.

Frequently Asked Questions

Oracle's total revenues for the three months ended August 31, 2009, decreased by 5% to $5.05 billion compared to $5.33 billion in the same period of 2008. This decline was primarily driven by a significant decrease in new software license revenues, which fell by 17% (14% on a constant currency basis). However, revenues from software license updates and product support showed resilience, growing by 6% (11% on a constant currency basis).

Oracle demonstrated strong cost control, with total operating expenses decreasing by 13% to $3.31 billion. This reduction, partly due to currency fluctuations but also cost management initiatives, led to a substantial increase in operating income by 14% to $1.74 billion. The operating margin improved significantly to 34% from 29% in the prior year.

Oracle entered into an Agreement and Plan of Merger with Sun Microsystems, Inc. on April 19, 2009, with an estimated total purchase price of approximately $7.4 billion. The transaction was pending customary closing conditions, including regulatory clearance. The filing does not provide details on the financial performance of Sun for this period, as it was not yet acquired, but it represents a significant strategic initiative for Oracle's future growth.

Oracle's liquidity position strengthened considerably. Cash and cash equivalents increased to $16.1 billion from $9.0 billion at the end of the previous fiscal quarter. This increase was primarily driven by the issuance of $4.5 billion in senior notes in July 2009 and strong operating cash flows, which rose by 15% to $3.74 billion. The company also had $4.5 billion in marketable securities, bringing total liquid assets to over $20.5 billion.