Oracle’s Q1 Guidance

After today’s close, Oracle ($ORCL) held a conference call. For Q1, the company sees earnings ranging between 45 cents and 48 cents per share. Wall Street’s estimate was 46 cents per share.

The stock dropped about 7% in the after-hours market. I strongly suspect this will fade at tomorrow’s open. Here’s what the company had to say:

For the year, our operating income grew 27% and even with the Sun Hardware business included in our results for the full year, we delivered non-GAAP operating margins of only 2% — 2 points below our all-time high. The non-GAAP tax rate for the quarter was 23.3% due to several favorable nonrecurring items including agreements with worldwide taxing authorities. EPS grew 25% to $0.75 on a non-GAAP basis.

The fact that we were able to put up these top line and bottom line results given our size, once again, demonstrates the strength of our diversified portfolio of enterprise products and the breadth and loyalty of our huge customer base and the strength of our operating model.

We now have $29 billion in cash and marketable securities and operating cash flow increased to a record $11.2 billion. For the year, all free cash flow increased to $10.8 billion. As we’ve always said, we’re committed to returning value to our shareholders through technical innovation, strategic acquisition, stock repurchases, prudent use of debt and a dividend. In this quarter, we repurchased 12.5 million shares for a total of a $422 million. For the full year, we repurchased 40.4 million shares for a total of approximately $1.2 billion. And the board again declared a dividend of $0.06.

Now the guidance. As you remember, we had a spectacular Q1 last year with New License up 25%, non-GAAP EPS up 38% and GAAP EPS up 20%. So assuming exchange rates remain at current levels, which is right now a positive 5% currency impact on license and revenue growth rates, our guidance for Q1 is as follows: New Software Licenses revenue growth is expected to range from 10% to 20%; Hardware Product revenue growth is expected to range from negative 5 to positive 5 and of course, that does not include the Hardware Support revenue; total revenue on a non-GAAP basis is expected to range from 9% to 12%; on a GAAP basis, we expect total revenue growth from 10% to 13%. Non-GAAP EPS is expected to be $0.45 to $0.48; GAAP EPS is expected to be $0.33 to $0.36. Now this guidance assumes a GAAP tax rate of 29% and non-GAAP tax rate of 28.5%, which is nearly 4 points higher than our tax rate in the previous year. Now, of course, this may end up being different.

Oracle is a cash flow machine. It’s truly astounding how much money they generate. They’re now sitting on $29 billion in cash. For the last fiscal year, Oracle made $2.22 per share. Based on the most recent after-hours trade, the stock is going for just under 14 times trailing earnings.

Posted by on June 23rd, 2011 at 10:59 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.