Author Archive

• Discussion of Oracle’s Earnings
  Eddy Elfenbein, March 21st, 2012 at 9:27 am

• Morning News: March 21, 2012
  Eddy Elfenbein, March 21st, 2012 at 5:45 am

  Italian Group Generali Targets $6.6 Billion Operating Profit

  China Quietly Relaxes Controls on Foreign Capital

  Sinopec Targets 31% of China’s 2015 Shale Gas Output, China Daily Says

  Australian Shares Drop As China Concern Reverberates

  U.S. Exempts Japan, 10 EU Nations From Iran Oil Sanctions

  Dubai Villa Sales Surge as Bank Lending Gains

  Bernanke Says Europe Must Aid Banks Even as Strains Ease

  Amazon Wrings Profit From Fulfillment as Spending Soars

  Oracle 3Q Profit Climbs 18% On Growth From New Licenses

  HP to Merge Printer, PC Arms in Revamp

  Generic Drugs Prove Resistant to Damage Suits

  Volkswagen Mans Up With Bug Leaving Women Behind in Sales

  Remember Datsun? It’s Coming Back From The Scrap Heap

  Viterra Deal Gives Glencore Influence in Global Wheat Trade

  Epicurean Dealmaker: Three’s a Crowd

  Roger Nusbaum: The Apple Party Continues

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• Oracle’s Q4 Guidance
  Eddy Elfenbein, March 21st, 2012 at 1:10 am

  This is from today’s earnings call:

  So here goes with the guidance. New software license revenue growth is expected to range from 1% up to 11% up in constant currency. Subtracting the 3 points, you get to negative 2% to 8% in U.S. dollars currently. Now the Hardware business has not turned out to be very seasonal, in fact. So I’m going to give my guidance really sequentially. And what we’re seeing for next quarter is hardware revenues a little more — basically, the low end of my range would be somewhere about where it is this past quarter, Q3, to potentially as much as $100 million to $110 million above where we closed this past quarter. That would be somewhere between I guess $870 million, let’s say, to as high as $980 million.

  So total revenue growth on a non-GAAP basis is expected to range from 1% to 5% in constant currency, subtracting the 3 points, it would be negative 2% to 2% in U.S. dollars. On a GAAP basis, we expect total revenue growth from 1% — sorry about that. Non-GAAP EPS is expected — oh, excuse me. On a GAAP basis, we expect total revenue growth basically in the same range as non-GAAP. Non-GAAP EPS is expected to be somewhere between $0.78 and $0.83 in constant currency. That would be up from $0.75 last year or $0.76 to $0.81 in reported dollars. GAAP EPS is expected to be $0.65 to $0.70 in constant currency. That would be up from $0.62 last year, and $0.62 to $0.67 in U.S. dollars. This guidance assumes a GAAP tax rate of 25% and a non-GAAP rate of 24.5%. That would be up from a little over 23%, I think, last year.

• Professor Bernanke
  Eddy Elfenbein, March 20th, 2012 at 6:55 pm

  Here’s Ben Bernanke’s college lecture given today at George Washington titled: The Federal Reserve and the Financial Crisis.

• Oracle Earns 62 Cents Per Share
  Eddy Elfenbein, March 20th, 2012 at 4:08 pm

  Nice earnings. The Street was expecting 56 cents per share.

  Oracle Corporation today announced fiscal 2012 Q3 GAAP total revenues were up 3% to $9.0 billion, and non-GAAP total revenues were up 3% to $9.1 billion. Both GAAP and non-GAAP new software license revenues were up 7% to $2.4 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 8% to $4.1 billion. Both GAAP and non-GAAP hardware systems products revenues were down 16% to $869 million. GAAP operating income was up 11% to $3.3 billion, and GAAP operating margin was 37%. Non-GAAP operating income was up 8% to $4.2 billion, and non-GAAP operating margin was 46%. GAAP net income was up 18% to $2.5 billion, while non-GAAP net income was up 13% to $3.1 billion. GAAP earnings per share were $0.49, up 20% compared to last year while non-GAAP earnings per share were up 15% to $0.62. GAAP operating cash flow on a trailing twelve-month basis was $13.5 billion.

  “Oracle is on track to deliver the highest operating margins in our history this year,” said Oracle President and CFO, Safra Catz. “Oracle can achieve these record margins as an integrated hardware and software company because we are focusing on high margin systems where hardware and software are engineered to work together.”

  I was wrong about the quarterly dividend. It’s still at six cents per share. The stock is up 2.8% after hours.

• The Rising Yield Curve
  Eddy Elfenbein, March 20th, 2012 at 1:29 pm

  Here’s a graph which illustrates the point I’ve been making about the market’s changing mood. Over the last few weeks, Treasury interest rates along the yield curve have been rising. This is a reflection of the market leaving conservative assets in search of riskier ones.

  The increase in rates has been most prominent at the long end of the yield curve. From five years out to 30 years, interest rates have increased by roughly 50 basis points. Rates have climbed especially since March 6th.

  

• Donaldson’s Amazing (But Dull) Run
  Eddy Elfenbein, March 20th, 2012 at 11:19 am

  As long-time readers know, I love finding dull stocks that have done extremely well over the years. If you take a step back, it’s kind of amazing that Wall Street focuses so heavily on high-glamour businesses while there are lots of great companies that get almost no attention.

  Just think: How many stocks do you recognize from the Top 10 performers of the last 20 years?

  One such outstanding dull stock is Donaldson ($DCI) who’s in the exciting business of…filtration systems! Check out the graph below. The stock was on my Buy List up through 2009 when I stupidly kicked it off. Over the last 27 years, Donaldson is up 9,700% to the S&P 500’s 695%. That doesn’t include the dividend which has been increased every year since 1996.

  Over the last three years, Donaldson’s earnings-per-share have grown from $1.67 to $2.19 to $2.87. Note the nice steady upward trend. That’s what we like to see.

  Their fiscal year ends in July so we already have two quarters under our belt. Donaldson’s public EPS forecast for this year is $3.25 to $3.45. Using my trusty abacus, I think they should be able to earn $3.40 per share this year and $3.72 per share next year. Give or take. Donaldson’s CEO recently said that their earnings for this fiscal year would constitute the 21st record year in the last 23 years.

  As much as I like Donaldson, the shares seem very pricey here. Of course, that’s what I thought in late 2009 when I decided to take it off the Buy List.

  One final note: Donaldson’s stock will split 2-for-1 next week.

  

• Happy Birthday Vera Lynn
  Eddy Elfenbein, March 20th, 2012 at 8:17 am

  95 years old

• Morning News: March 20, 2012
  Eddy Elfenbein, March 20th, 2012 at 5:09 am

  In Greek Crisis, a Little-Known Adviser With Outsize Influence

  Swiss Secrecy Besieged Makes Banks Fret World Money Lure Fading

  Glencore to Resume Philippine Copper Ops by Mid-year

  Behind the Blood Money

  Europe’s Economy Tolerant of Oil’s Gradual Rise

  Geithner Warns EU Against Hasty Budget Measures

  Senate Seeks to Toughen a Bill Aimed at Start-Ups

  U.S. Made Profit on Mortgage Debt

  Apple to Pay Dividend, Buy Back Stock to Return Some of Cash

  Amazon Acquires Kiva Systems in Second-Biggest Takeover

  Facebook Is Said to Plan Paying 1.1 Percent Fee to Banks

  Adobe Net Drops 21% Amid Shift

  Citigroup Sells Stake in Shanghai Pudong Development Bank

  Berkshire Investor Suit Over Sokol’s Stock Claims Tossed

  Wendy’s Tops Burger King as Second-Largest U.S. Burger Chain

  Stone Street: Newsflash: Chinese Co’s are Being Forced to Falsify Data

  Howard Lindzon: Boo Apple…The Great Utility Company…Let the Double Taxation Begin!

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• Volatility Has Biggest Decline in 78 Years
  Eddy Elfenbein, March 19th, 2012 at 1:03 pm

  From Bloomberg:

  Daily price changes in the S&P 500 are decreasing the most in eight decades, shrinking to the smallest since 1995 when investors abandoned stocks just before the biggest rally ever.

  The benchmark gauge for U.S. equities has gained or lost an average 0.46 percent a day this year, compared with 1.04 percent in 2011, the biggest reduction since 1934, during the Great Depression, according to data compiled by Bloomberg. Swings are diminishing after valuations fell 40 percent and correlation among shares weakened the most in at least three decades.

  At the same time, trading on the New York Stock Exchange has slumped to the lowest rate in 13 years, spurring concern about the biggest first-quarter rally since 1998. Bulls say the decline in trading and daily swings signal fear is dissipating after one of the most volatile years on record. Bears say falling volume is a warning gains will reverse should economic reports and earnings fail to match expectations.