Friday, September 19, 2008

ORCL Q1 earnings

Oracle's Q1 earnings beat analyst estimates by 2 cents, with profits coming in at 32 cents per share. New sales were up 14% inline with estimates and profitability was up 28% YoY. Management's Q2 outlook predicts lower sales revenues growing between 2-12% compared with 38% the previous year. Software updates and support are almost 50% of Oracle's earnings, so recurring revenue can easily support profits even with weak sales. This is the main reason ORCL reaffirmed analysts Q2 profit estimates of 35-36 cents a share.

ORCL has responded nicely to earnings. Trading around $18.50 early Thursday it closed at $20.07 today, 8.5% swing in two days. Because ORCL predicts fairly conservative earnings for the next quarter, I recommend continuing to hold the stock in our portfolio. A concern of mine was that SAP was continuing to steal market share from ORCL. Even with the weak economy it seems ORCL has been able to retain a good number of its customers, while preventing SAP from gaining ground.

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