Tags: oracle | earns | buyback

Oracle Beats Estimates, Sets $10 Billion in Buybacks

Monday, 18 June 2012 06:48 PM EDT

Oracle Corp. was so pleased with its latest quarter that it apparently couldn't wait to share the news.

In surprise move, the business software maker released its fiscal fourth-quarter results late Monday. The numbers weren't supposed to come out until Thursday.

Safra Catz, Oracle's chief financial officer, told analysts in a hastily scheduled conference call that the company didn't think investors would mind hearing about a solid quarter amid unsettling fears about how Europe's shaky economy might be affecting business conditions.

It was still a puzzling decision, given that the timing conflicted with a Los Angeles event that Microsoft Corp. held to unveil a tablet computer to compete against Apple Inc.'s iPad. The overlap kept some of the same securities analysts that follow Oracle tied up with the Microsoft announcement.

That meant Oracle's performance for the three months ending in May didn't get as much attention as it might have had the company stuck to its original schedule.

The quarter was highlighted by an 8 percent increase in net income that topped analysts' predictions. Oracle also posted a 7 percent gain in its sales of new software licenses that indicated there is still strong demand for technology that helps businesses automate their administrative tasks.

Oracle Corp. is viewed as a technology bellwether because it sells software and high-end computers to companies and government agencies throughout the world.

In another encouraging sign, Oracle committed to spending an additional $10 billion buying back its stock. That should help boost Oracle's future earnings by reducing the number of outstanding shares. Based on Monday's closing price Oracle's stock, the $10 billion would buy about 369 million, or 7 percent, of the company's roughly 5 billion outstanding shares. Oracle spent about $6 billion buying back 207 million shares in its past fiscal year.

Oracle shares gained 96 cents, or more than 3 percent, to $28.08 in Monday's extended trading. The stock had dropped 58 cents in Monday's regular trading session as investors reacted to the unconfirmed reports of several analysts who said they had been told by unnamed industry sources that Oracle was cutting its ties with Keith Block, its top North American sales executive for the past decade.

The company didn't address Block's status in Monday's quarterly release or ensuing conference call. Oracle didn't respond to request for comment about Block either. The executive's biography remained listed on Oracle's website late Monday.

Oracle earned $3.45 billion, or 69 cents per share, for the three months ending in May. That compared to income of $3.2 billion, or 62 cents per share, at the same time last year.

If not acquisition expenses and other costs, Oracle said it would have earned 82 cents per share. On that basis, Oracle exceeded the average estimate of 78 cents per share held among analysts surveyed by FactSet.

Revenue edged up 1 percent from last year to $10.9 billion, slightly higher than analyst projections.

If not for a stronger dollar, which hurt its results outside the U.S., Oracle said its revenue would have increase by 5 percent from the same time last year.

Software licensing revenue would have increased by 11 percent if currency exchange rates had remained at the same level as last year. Investors focus on sales of new software because the new licenses unleash a steady stream of future revenue from maintenance and software upgrades. Oracle expects its software licenses for the current quarter ending in August to range from a 1 percent decrease from the same time last year to a 9 percent increase.

Oracle is still struggling to diversify into hardware. Revenue from the sale of hardware products during the latest quarter declined 16 percent from the same time last year. The sagging hardware sales have raised questions about Oracle's decision to buy Sun Microsystems, a struggling maker of high-end computers, for $7.3 billion two years ago.

Catz and Oracle CEO Larry Ellison have predicted the Sun deal will pay off. Block, though, declared Sun as "dead, dead, dead" during an instant messaging exchange with another Oracle executive last year. The IMs recently surfaced in a California trial pitting Oracle against rival Hewlett-Packard Co. in a contract dispute.

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Monday, 18 June 2012 06:48 PM
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