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pww.comOracle Corp., Q1 2008 Earnings Call, Sep-20-2007 - NYSE:ORCL

NYSE:ORCL

Safra Catz [Executives] đź’¬

Safra Catz provided a comprehensive overview of Oracle’s first quarter fiscal year 2008 performance and guidance for the upcoming quarter. Here is a detailed summary of her comments:

Opening Remarks

  • Acknowledged the strong start to the fiscal year with excellent quarter-over-quarter growth.
  • Noted that the quarter's results were not dependent on unusually large deals.
  • Highlighted that the company delivered these results against a strong Q1 in the previous year.

New Software License Revenues

  • Reported a 35% increase to $1.1 billion, the strongest growth in a decade.
  • Mentioned that Hyperion contributed $80 million and Agile contributed about $7 million to the quarter.

Technology Business Performance

  • Observed exceptional strength with license revenues growing 23% year-over-year.
  • Detailed regional growth: 23% in the Americas, 38% in EMEA, and 4% in APAC.

Applications Business Performance

  • Noted a strong 65% year-over-year growth.
  • Provided regional growth figures: 58% in the Americas, 77% in EMEA, and 67% in APAC.

Update and Support Revenue

  • Chronic update and support revenue grew 22% to $2.4 billion on a non-GAAP basis.

Profitability

  • Non-GAAP income from operations grew 28% to $1.7 billion, resulting in operating margins of 37%, up from 36% in the previous year.
  • EPS grew 27% to $0.22 on a non-GAAP basis, excluding stock option expense.

Cash Flow

  • Operating cash flows for the trailing 12 months increased by $1.9 billion to $6.6 billion.
  • Free cash flow increased 40%.
  • Oracle spent $0.5 billion on its buyback and bought back approximately 25 million shares.
  • Paid down $1.4 billion of commercial paper.
  • Recently swapped out floating rate debt into a lower, fixed rate, resulting in meaningful debt service reductions.

Currency Impact

  • Positive 3 points on new license and 4 points on total revenue.

Guidance

  • For new software license revenues, expected to be up 15% to 25% year-over-year.
  • For total revenues, expected to be up 18% to 21% year-over-year on a non-GAAP basis, and 19% to 21% on a GAAP basis.
  • Non-GAAP EPS, excluding stock-based compensation, expected to be $0.26 or $0.27, compared to $0.22 last year.
  • GAAP EPS for the second quarter expected to be $0.20 to $0.21, up from $0.18 last year.
  • Assumed tax rate of 28.7% for Q2, similar to the previous year.
  • Expected 4 points of positive currency impact on Q2 total revenues, subject to fluctuations.

Closing Remarks

  • Passed the call over to Larry Ellison for further comments.

Krista Bessinger [Executives] đź’¬

During the Oracle Corporation's Q1 fiscal year 2008 earnings conference call on September 20, 2007, Krista Bessinger, presumably in her role as a spokesperson or executive, made the following statements:

  1. Opening Remarks:

    • Welcomed everyone to the call.
    • Introduced the executives present: Larry Ellison (CEO), Charles Phillips (President), and Safra Catz (President and CFO).
    • Announced the format of the call, which would include prepared remarks followed by a Q&A session.
    • Reminded listeners that the discussion might include forward-looking statements and cautioned against placing undue reliance on them.
    • Mentioned that the forward-looking statements represented the company’s current judgment and opinions only as of the date of the presentation.
    • Noted that the company was not obligated to revise or publicly release the results of any revisions of these forward-looking statements in light of new information or future events.
    • Advised listeners to review the company’s most recent Form 10-K and Form 10-Q for a complete discussion of factors and risks that may affect future results or the market price of the stock.
    • Informed that a PDF copy of the press release and financial tables could be viewed and downloaded on the Oracle Investor Relations website at www.oracle.com/investor.

  2. Transferred the Call:

    • Transferred the call to Safra Catz for her opening comments.

  3. Conclusion:

    • Announced that there would be a telephone replay available for 24 hours with the replay number 719-457-0820 and passcode 9004474.

    • Mentioned that a webcast replay would also be available on the Oracle Investor Relations website through the close of market on September 27.

    • Thanked everyone for joining the call.

Lawrence Ellison [Executives] đź’¬

During the Oracle Corporation Q1 2008 Earnings Call on September 20, 2007, Lawrence Ellison provided a comprehensive overview of the company's performance and strategic direction. Here’s a detailed summary of his comments:

Overview of Oracle’s Business Goals

  • Database: Oracle aims to maintain its position as the number one provider.
  • Middleware: Oracle seeks to become the number one provider, currently ranking third behind Microsoft and IBM.
  • Applications: Oracle targets the number one spot, currently holding the second position behind SAP.

Database Business

  • Oracle remains the leading database provider, ahead of IBM and Microsoft.
  • Oracle gained another point of market share against IBM in the past year.
  • Oracle emphasizes its strength in Linux, the fastest-growing operating system, where it leads Microsoft.
  • Oracle acknowledges niche players like Sybase and new entrants like Netezza, hinting at potential responses to these competitors.

Middleware Business

  • Oracle is the fastest-growing middleware company, with a goal to surpass IBM.
  • Oracle has surpassed niche players and is closing in on IBM, with a trajectory suggesting it could become the number two player by the end of the year or the next.
  • Oracle contrasts its strategy based on industry standards with Microsoft’s proprietary approach.
  • Oracle notes the decline of SAP’s NetWeaver following the departure of Shai Agassi.

Applications Business

  • Oracle is growing significantly faster than SAP, its primary competitor in applications.
  • Oracle’s strategy focuses on adding value to existing large and mid-market customers through industry-specific software, rather than targeting small businesses.
  • Oracle critiques SAP’s strategy to target small businesses with its Business ByDesign product, citing challenges such as the lack of sales force synergy and the high cost of implementation.
  • Oracle expresses skepticism about the profitability of software as a service (SaaS), noting that no one has figured out how to make substantial profits in this market.

Closing Remarks

  • Ellison thanked Charles Phillips and handed over the call to him for further operational insights.

Ellison’s comments provide insight into Oracle’s competitive landscape, strategic positioning, and market outlook, emphasizing the company’s focus on innovation, market leadership, and customer-centric growth.

Charles Phillips [Executives] đź’¬

During the Oracle Corporation Q1 fiscal year 2008 earnings call, Charles Phillips, one of the executives, provided insights and updates on the company’s operations and product areas. Here’s a detailed summary of his comments:

Operational Perspective

  • Start to the Year: Noted that the company had a very good start to the year, with well-executed operations in EMEA and North America.
  • Retail Vertical Success: Mentioned that the retail vertical had a particularly strong performance.
  • Territory Consistency: Highlighted that the company had fewer changes in terms of territories, which helped maintain relationship consistency.
  • Timing of Kickoffs: Improved the timing of the kickoff meetings to occur earlier in the quarter.
  • Productivity Improvement: Noted that the company achieved 35% license growth with about 30% sales and marketing growth in terms of expenses, indicating room for further productivity improvement.

Product Area Highlights

  • Database Business:

    • Enterprise Options: Continued to perform well.
    • Newer Options: Oracle Database Audit Vault saw a 48% increase quarter-over-quarter, and Content Database and Records Database both experienced nearly 300% growth.
    • Oracle Database 11g Release: Announced the release of Oracle Database 11g, with 35,000 downloads in the first month.
    • New Options: Advanced compression, total recall, real application testing, and active data guard were introduced with the 11g release.

  • Middleware Strength:

    • Compared Oracle’s 129% growth to BEA’s 9% decline, highlighting Oracle’s significant market share gains.
    • Number of Middleware Customers: Noted that Oracle now has 53,000 middleware customers.
    • Customer Upgrades: Highlighted that 85% of the customer base is on the latest two releases, demonstrating the regularity of every 48-month release cycle.

  • Forrester Evaluation: Mentioned that Oracle was named the leader in Forrester’s evaluation of nine platform vendors against 175 criteria in middleware.

Key Wins

  • Intuit and Thomas Cook: Both companies committed to Oracle’s entire suite of offerings, marking wins against IBM.
  • University of Virginia: Noted as an enterprise performance management win.
  • Ford Motor Company, Cisco, and Baker Hughes: Highlighted as business intelligence wins.
  • Anheuser-Busch and U.S. Steel: Mentioned as content management wins over Documentum and IBM Filenet.
  • Royal Bank of Scotland and Scandia: Noted as management enterprise-wide rollout wins over Sun, IBM, and C8.

Applications Business

  • Customer Understanding: Suggested that customers are increasingly understanding Oracle’s unique position as the only company offering an end-to-end application suite spanning ERP, CRM, and vertical applications on a standard technology stack.
  • Integration Platform: Discussed the Application Integration Architecture (AIA), which pre-integrates key processes across the application portfolio, such as order-to-cash processes from Siebel to Oracle EBS.

CRM On Demand

  • Version 14 Release: Mentioned the release of Version 14 of Oracle’s CRM On Demand service.
  • Large Pharmaceutical Company Win: Noted a win with one of the top 5 pharmaceutical companies in the world, involving 300 seats, with expectations of further expansion.
  • ADP Clarification: Clarified that the ADP win involved over 300 users and was a standalone deal, not related to an acquisition.
  • European Software Company Standardization: Mentioned a large European software company that standardized on Oracle’s CRM On Demand.

On-Premise Applications

  • New Releases and Upgrades:
    • Noted the successful release of five new versions of Oracle’s ERP and CRM products earlier in the year.
    • Highlighted the 30% upgrade rate of the PeopleSoft Version 9 installed base, including key customers such as ABN Amro, Northwestern University, and the Wyoming Department of Transportation.
    • Mentioned the release of PeopleSoft Version 8.12 for Land O’Lakes and Johnson & Johnson, as well as the release of J.D. Edwards 8.9.1, with over 100 customers actively upgrading.
    • Announced the shipment of the new release of the Business Suite Version 12.

Retail Vertical

  • Blowout Performance: Noted that the retail vertical had a “blowout” performance, with key wins such as Ahold and the Commonwealth of Pennsylvania Liquor Control Board.

Verticals

  • Telco Area:
    • PCCW Win: Highlighted as a win over Amdocs and Keenan.
    • Canal in EMEA: Noted as a win over Comverse.
  • Banking:
    • Korea Exchange Bank Win: Through iflex, Oracle won the Korea Exchange Bank.
    • Core Banking Product Leadership: Noted that iflex was named the number 1 core banking product for the fifth consecutive year.
  • Tax and Utilities:
    • Commonwealth of Kentucky: Mentioned the win involving the state’s entire tax system.
    • Transurban: Noted as a win for standardizing on the SPL product.

Closing Remarks

  • OpenWorld Event: Reminded everyone about the upcoming Oracle OpenWorld event scheduled for November 11-15 in San Francisco, celebrating Oracle’s 30-year anniversary.

These comments provide insight into the operational and product successes of Oracle during the quarter, as well as key wins and strategic directions in various vertical markets.

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