Thursday, March 25, 2010

Oracle reported earnings today and slightly beast estimates as revenue from new software licenses grew higher for the second quarter in a row. They reported earnings of 38 cents up from 35 cents in the same quarter last year. Sales reached 6.47 Billion compared with 5.5 billion last year.

This quarter was very strong with a 10% growth in software litcensing excluding Sun. In addition to this top line performance Oracle's operating margin was 45% which was substantially higher than rival IBM.

This quarter's results took into account revenues from Sun for only a month and they were $596 million showing that customers are responding well to the acquisition. It is expected Sun will add
$1.5 and $2 billion in operating income for 2010 and 2011. As for Sun's revenue Oracle has already cut out Sun's products that were selling at a loss. This change alone will immediately show more profit on less revenue. They are also now compensating sales teams on margins and not just revenues which will change the sales mix from commodity systems(where they were losing profit) to value added systems where Sun's differentiation is clear to customers. The board also declared a %0.05 dividen per share again.

With the acquisition of Sun and the mentioned management plans I see strong upside in Oracle and will keep the company a BUY.

Rory Blake

No comments: