Oracle Corporation (ORCL)

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Oracle (ORCL)

F3Q10 Earnings Call

March 25, 2010 5:00 pm ET

Executives

Ken Bond - Investor Relations

Jeffrey E. Epstein - Chief Financial Officer, Executive Vice President

Safra A. Catz - President, Director

Lawrence J. Ellison - Chief Executive Officer, Director

Charles E. Phillips Jr. - President, Director

Analysts

Adam Holt - Morgan Stanley

John Difucci - J.P. Morgan

Sara Friar - Goldman Sachs

Bill Winslow – Credit Suisse

Heather Bellini - ISI

Kash Rangan - Merrill Lynch

Brent Thill – UBS

Presentation

Operator

Welcome to today's Oracle Corporation quarterly conference call. Today’s call is being recorded. At this time, I would like to introduce Ken Bond, Vice President of Investor Relations. Please go ahead, sir.

Ken Bond

Thank you. Good afternoon everyone and welcome to Oracle's third quarter fiscal year 2010 earnings conference call. I am 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 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 holds, 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 affect these forward-looking statements. We would encourage you to review our most recent reports on forms 10-K and 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. 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 publicly release the results of any revisions of these forward-looking statements in light of new information or future results.

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

We will begin the call with a few prepared remarks before taking questions from the audience. With that I would like to turn the call over to Jeff Epstein for his opening remarks. Jeff?

Jeffrey Epstein

Thank you, Ken. Good afternoon, everyone and thank you for joining us. I will review our non-GAAP financial results focusing on U.S. dollar growth rates unless otherwise stated.

First, a comment about foreign exchange rate movements. Excluding Sun the actual currency benefit we saw this quarter was less than our guidance by approximately 2% for both new license revenue and total revenue. However, even with currency tailwinds being less than anticipated we were able to drive solid results this quarter as we beat our new license revenue guidance, beat our total revenue guidance and were at the high end of the EPS range with record Q3 earnings per share. Q3 was a solid quarter.

Before reviewing our income statement I would like to remind everyone that our guidance from last quarter excluded Sun. In discussing revenue I will provide revenue results as reported and for some key growth rates I will exclude Sun revenue to align the results to our guidance from last quarter.

In the third quarter our new software license revenues were $1.7 billion including $46 million from Sun. New software license revenues were up 13% and up 10% excluding Sun. This 10% growth beat the high end of our guidance range, calling for 9% growth. The Americas grew 22%. EMEA was up 3% and Asia was up 12%.

Our results continue to underscore the strength, balance and diversity of our business and the quarter was not dependent on any unusually large deals. Technology new license revenues were $1.2 billion up 11% as the Americas grew 20%, EMEA was up 2% and Asia was up 9%. Applications new license revenues were $477 million, up 21% from last year. The Americas grew 26%. EMEA was up 7% and Asia was up 29%.

Our software license update and product support revenues were $3.3 billion including $25 million from Sun and up 12% from last year. Customer support attachment and renewal rates continue at near record levels. Revenues from our hardware systems products were $273 million while revenues from hardware systems support were $224 million. Our services revenues were $931 million, down 9% as we continue to manage this business to profitable margins.

Our total revenues were $6.5 billion including $596 million from Sun. Total revenues for the quarter were up 18% and up 7% excluding Sun. Total revenues excluding Sun were at the high end of our guidance range even without the full benefit of currency tailwinds included in our guidance.

With Sun results now being included in our financial statements, non-GAAP operating income was $2.9 billion, up 13%. The non-GAAP operating margin for the quarter was 45%. Our tax rate for the third quarter was 25.9% as we saw some one-time benefits to our tax rate. Our Q3 non-GAAP earnings per share were $0.38, at the high end of our Oracle only EPS guidance range of $0.36 to $0.38. Earnings per share were up 9% from last year and include a $0.01 loss related to the devaluation of the Venezuelan currency.

In Q3 we repurchased 10.3 million shares at an average price of $24.28 per share for a total of $250 million. As we have previously discussed the rate of our stock buybacks will fluctuate each quarter taking into account alternative uses for our cash and our stock price.

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