Arik Hesseldahl

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Oracle Delivers on Earnings and on Its Promise to Profitably Acquire Sun

The Oracle machine kept on chugging along in the third quarter as profits rose 78 percent to $2.1 billion, or 54 cents a share before items, versus $1.19 billion a year earlier. Revenue was $8.8 billion, up 37 percent from the year ago period.

The company also raised its quarterly dividend by a penny per share, or 20 percent, making this the third year in a row it has boosted its dividend. It said it doesn’t expect significant impact on its operations in Japan following the earthquake. There had been some concerns.

Oracle said it expects profit–excluding one-time expenses–will be in the 69- to 73-cent range this quarter, beating the 66-cent average estimate of analysts. Revenue is expected to grow year-on-year in the range of 9 to 13 percent, which works out to a range of between $10.4 billion and $10.7 billion.

The results were led by sales of new software licenses, a key measure of new business as opposed to sales to existing computers, which rose 29 percent to $2.2 billion. This handily beat the company’s guidance for growth in new licenses of 10 to 20 percent.

Software license updates rose 13 percent to $3.7 billion. Hardware sales were $1 billion, but since Oracle closed on its Sun acquisition during this quarter a year ago, a year-on-year comparison doesn’t apply.

The strong earnings report comes a day after Oracle launched a quarrel with hardware rival Hewlett-Packard and chipmaker Intel by saying it would no longer develop software that runs on systems using Intel’s Itanium Processor because it expects Intel is quietly planning to kill the chip. Intel denied the claim, saying two new versions of Itanium are in the pipeline, while HP, which sells most of the systems containing the chip, said it was “shocked.” Oracle stuck to its guns, saying it was only trying to help its customers plan accordingly.

Speaking of HP, with Oracle CEO Larry Ellison serving on jury duty, it fell to President Safra Catz to deliver this quarter’s obligatory dig at HP during a conference call with analysts.

With Oracle’s hardware business showing a healthy hardware margin–which is interesting in light of the fact that the results contain the hardware assets of Sun Microsystems–Catz reiterated a prior promise to deliver a $1.5 billion profit on the Sun business by the end of this fiscal year. That makes Sun a good purchase, she said, when compared to HP’s acquisition of 3Par, though time will tell if Oracle can deliver on the promised $2 billion profit in year two.

It’s probably not a fair comparison. Sun was trading at an extremely depressed valuation when Oracle stepped in. Only months before, Sun had been trading at the value of its cash holdings. 3Par, on the other hand, saw its valuation triple as the result of a punishing bidding war between HP and Dell. However Catz isn’t the first one to say HP paid too much. But as usual, any chance to tweak HP’s nose is fair game at Oracle, as you can hear in the audio clip below.

Safracatz1 by ahess247