Oracle Corporation (ORCL)

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Oracle Corporation (ORCL)

Q4 2009 Earnings Call

June 23, 2009 5:00 pm ET

Executives

Ken Bond – VP IR

Jeff Epstein – CFO

Safra Catz – Co-President

Larry Ellison – CEO

Charles Phillips – Co-President

Analysts

Adam Holt - Morgan Stanley

Sarah Friar - Goldman Sachs

John DiFucci - JPMorgan

Brent Thill - Citigroup

Brendan Barnicle - Pacific Crest

Kash Rangan - Merrill Lynch

Presentation

Operator

Good day everyone and welcome to today's Oracle Corporation quarterly conference call. At this time, I would like to introduce Mr. Ken Bond, Vice President of Investor Relations for Oracle; please go ahead sir.

Ken Bond

Good afternoon everyone and welcome to Oracle's fourth quarter and fiscal year 2009 earnings conference call. I’m Ken Bond, Vice President Investor Relations and with us on the call today are Chief Executive Officer, Larry Ellison; President, Safra Catz; President, Charles Phillips; and Executive Vice President and Chief Financial Officer, Jeff Epstein.

As a reminder, today’s discussion will include forward-looking statements including predictions, expectations, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future may hold, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

Throughout today's discussion we will attempt to present some important factors relating to our business which may potentially effect these forward-looking statements, as a result we caution you against placing undue reliance on these forward-looking statements which reflect our opinion only as of today.

And as a reminder we are not obligating ourselves to revise or publically release the results of any revisions of these forward-looking statements in light of new information or future events. We would encourage you to review our most recent reports on Form 10-K and Form 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock.

A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, and other supplemental information can be viewed and downloaded from our website at www.oracle.com/investor.

We’ll begin with a few prepared remarks before taking questions from the audience. In today’s conference call we will only be discussing Oracle’s Q4 and fiscal 2009 results.

With that I would like to turn the call over to Jeff Epstein for his opening comments.

Jeff Epstein

Thank you Ken and welcome to Oracle. Good afternoon everyone and thank you for joining us. I will review our non-GAAP financial results for the fourth quarter, focusing on constant currency growth rates unless otherwise stated.

First a note about foreign exchange rate movements, in March we told you that using then current exchange rates would reduce our Q4 revenue growth by 12 points compared to constant currency. Even though the US dollar weakened from March, the US dollar strengthened compared to Q4 of last year reducing our international revenues, expenses, and profits when measured in US dollars.

As a result currency movements reduced new license revenues by 9%, total revenues by 8%, net income by 11%, and earnings per share by 10% or $0.05 per share compared to Q4 of last year. Now let’s review the income statement, in the fourth quarter our new software license revenues were $2.7 billion, down 4% in constant currency and down 13% in US dollars.

EMEA grew 2%, Asia grew 3%, and the Americas were down 12%. Technology new license revenues were $1.9 billion, down 1% in constant currency and down 10% in US dollars. EMEA grew 1%, Asia grew 5%, and the Americas were down 6%.

Our BEA products, which have now been technically integrated with Oracle’s Fusion Middleware, packaged into unified suites and are sold off the same price list, accounted for $201 million of our Q4 new license revenues based on our internal allocations which are consistent with previous quarters.

Applications new license revenues were $805 million, down 11% in constant currency and down 19% in US dollars. EMEA grew 5%, Asia fell 4%, and the Americas were down 22%. Our software license updates and product support revenues were $3.1 billion, up 17% in constant currency and up 7% in US dollars.

These revenues are annual fees that customers pay to receive updated versions of and enhancements to their existing products. Our services revenues were $1.1 billion, down 7% in constant currency and down 16% in US dollars.

Our total revenues were $6.9 billion, up 3% in constant currency which is above the high end of our constant currency guidance range of plus 2% to minus 3% and down 5% in US dollars.

Operating income was $3.5 billion, up 9% in constant currency and down 1% in US dollars. Our non-GAAP operating margin grew by 240 basis points to 51% in US dollars. This is the highest operating margin in Oracle’s history as a public company and further demonstrates the success of our operating model.

Our tax rate was 31.3% which is higher then our guidance of 28% due largely to a one-time expense from a recent federal tax ruling involving Xilinx and the allocation of stock option expense deductions. Our Q4 non-GAAP earnings per share were $0.46, at the high end of our EPS guidance range of $0.42 to $0.46.

This was up 9% in constant currency and down 1% in US dollars. Our non-GAAP earnings per share would have been $0.05 higher had foreign exchange rates remained the same as they were in Q4 of last year.

Read the rest of this transcript for free on seekingalpha.com