10-QPeriod: Q2 FY2010

ORACLE CORP Quarterly Report for Q2 Ended Nov 30, 2009

Filed December 22, 2009For Securities:ORCLORCL-PD

Summary

Oracle Corporation (ORCL) reported its fiscal third-quarter 2010 results for the period ending November 30, 2009. The company demonstrated resilience in its software business, with total revenues showing a modest increase, driven by growth in software license updates and product support, partially offset by a decline in new software licenses. The services business experienced a notable contraction, reflecting broader economic headwinds impacting IT services demand. Despite revenue pressures in certain segments, Oracle maintained strong operating margins and generated robust cash flow from operations, underscoring its operational efficiency and financial discipline. A significant development during the quarter was the ongoing regulatory review of Oracle's proposed acquisition of Sun Microsystems, which was a key focus alongside its core business performance. The company also continued its share repurchase program and declared a dividend, signaling its commitment to returning value to shareholders.

Financial Highlights

52 data points
Beta

Revenue

$5.86B

100.0% Gross Margin

Net Income

$1.46B

24.9% Net Margin

EPS (Diluted)

$0.29

Total Assets

$53.83B

Cash & Equivalents

$14.92B

Free Cash Flow

$651.00M

Financial Statements
Beta
Revenue$5.86B
Cost of Revenue$0
Gross Profit$5.86B
Operating Expenses$3.68B
Operating Income$2.18B
Interest Expense$188.00M
Net Income$1.46B
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)5.01B
Shares Outstanding (Diluted)5.06B

Key Highlights

  • 1Total revenues increased slightly by 4% to $5.86 billion, with software revenues growing by 9% year-over-year, while services revenues declined by 15%.
  • 2New software license revenues saw a modest increase of 2% to $1.65 billion, with the Americas region showing growth while EMEA and Asia Pacific experienced declines.
  • 3Software license updates and product support revenues demonstrated strong performance, increasing by 14% to $3.25 billion, indicating continued customer retention and demand for ongoing support.
  • 4Operating income increased by 10% to $2.18 billion, and operating margin expanded to 37% from 35% in the prior year period, highlighting improved operational efficiency.
  • 5Net income rose by 12% to $1.46 billion, resulting in diluted earnings per share of $0.29, up from $0.25 in the same period last year.
  • 6Cash and cash equivalents significantly increased to $14.92 billion as of November 30, 2009, bolstered by strong operating cash flows and recent debt issuance.
  • 7The company continued its significant share repurchase activity, repurchasing 11.6 million shares for approximately $250 million during the quarter.

Frequently Asked Questions

Oracle's software business showed strength, with total software revenues increasing by 9% to $4.90 billion, driven by a robust 14% growth in software license updates and product support. However, the services business experienced a notable decline of 15% to $958 million, reflecting a challenging economic environment impacting IT services demand.

Oracle entered into an Agreement and Plan of Merger with Sun Microsystems in April 2009, with an estimated purchase price of $7.4 billion. As of this filing date, the transaction was subject to regulatory clearance, with a Statement of Objections received from the European Commission in November 2009. The outcome of this regulatory review was a key factor for the company's future strategic direction.

Oracle effectively managed its operating expenses, which saw a slight increase of 1% to $3.68 billion (or a 2% decrease on a constant currency basis). This cost control, combined with revenue growth in key areas, led to a significant improvement in operating income, which rose by 10% to $2.18 billion, expanding the operating margin to 37%.

Oracle's cash and cash equivalents increased substantially to $14.92 billion. The company generated strong cash flow from operating activities, amounting to $4.39 billion for the six months ended November 30, 2009. This strong operating performance, coupled with proceeds from debt issuance, significantly bolstered its liquidity.