Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Permalink | Email this | Linking Blogs | Comments

For the most part, the dominant players in the enterprise resource planning (ERP) software space include Oracle (NASDAQ: ORCL), SAP (NYSE: SAP), and Microsoft (NASDAQ: MSFT).

But, there are a variety of mid-size players trying to compete. One is Lawson (NASDAQ: LWSN).

And this week, the company reported its latest quarterly report. Revenues increased 9.4% to $233 million but net income dropped 55% to $3.7 million, or $0.02 per share. Why? Well, Lawson took a charge for its exposure to auction-rate securities.

The quarter saw $51 million in signed software contracts, up from $42 million in the same period a year ago (there were four deals in excess of $1 million). For the most part, Lawson is getting traction from investments in its technology platform -- as well as its salesforce.

For the year, Lawson forecasts revenues of $920 million to $925 million. EPS (earnings per share) is expected to range from $0.43 to $0.47.

However, Wall Street is still concerned about the competition and macro environment. As a result, the shares of Lawson have been languishing this year, dropping from $9.94 to $7.14.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Permalink | Email this | Linking Blogs | Comments

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Bed Bath & Beyond Inc. (NASDAQ: BBBY) Q1 earnings tumbled while revenues rose.
• Casella Waste Systems Inc. (NASDAQ: CWST) posted a narrower-than-expected Q4 loss.
• CKE Restaurants Inc. (NYSE: CKR) Q1 earnings increased but its revenue slipped.
• Darden Restaurants Inc. (NYSE: DRI) swung to a Q4 profit on strong sales at Olive Garden.
• Ericsson (NASDAQ: ERIC) said it might not see Q2 profit growth on lower demand and shipping delays.
• General Mills Inc. (NYSE: GIS) Q4 earnings declined but were in line with expectations.
• Gerber Scientific Inc. (NYSE: GRB) reported solid Q4 and full-year results that pleased investors.
• IHS Inc. (NYSE: IHS) beat Q2 expectations and posted record quarterly cash flow from operations.
• Jabil Circuit Inc. (NYSE: JBL) stronger-than-expected Q3 results led to an analyst's upgrade.
• KB Home (NYSE: KBH) widened its Q2 loss due to weak sales and falling prices.
• Kroger Co. (NYSE: KR) beat Q1 expectations as consumers sought discounts on food and gas.
• Monsanto Co. (NYSE: MON) beat Q3 earnings estimates but fell short of revenue estimates.
• Nike Inc. (NYSE: NKE) posted better-than-expected Q4 results boosted by international strength.
• Oracle Corp. (NASDAQ: ORCL) posted strong Q4 results that topped analysts' expectations (see transcript).

• Palm Inc. (NASDAQ: PALM) posted dismal results as revenue fell despite higher sales volume.
• Red Hat Inc. (NYSE: RHT) Q1 revenues soared as results beat Wall Street expectations.
• Research in Motion Ltd. (NASDAQ: RIMM) posted disappointing results and lackluster guidance (transcript).
• Rite-Aid Corp. (NYSE: RAD) swung ot a larger-than-expected Q1 loss on integration difficulties.
• Sonic Corp. (NASDAQ: SONC) earnings warning took shares to a new 52-week low.
• Symmetry Medical Inc. (NYSE: SMA) beat Q1 estimates on increased demand and acquisitions.
• United Parcel Serivce (NYSE: UPS) cut its earnings forecast due to rising fuel prices and less demand.
• Walgreen Co. (NYSE: WAG) posted sluggish Q3 results despite cost-cutting measures.

Also, do the results from Oracle, Research in Motion, and Red Hat point to a bottom for tech stocks? Will Google's (NASDAQ: GOOG) new CFO be more likely to provide the guidance that analysts crave?

Upcoming results to watch for include H&R Block (NYSE: HRB), Constellation Brands (NYSE: STZ), Apollo Group (NASDAQ: APOL), Family Dollar (NYSE: FDO), WD-40 (NASDAQ: WDFC), and Berkshire Hathaway (NYSE: BRK.A).

Visit AOL Money & Finance for more earnings coverage.

Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

Minyanville Professor Adam Katz dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

I've said it before: the second quarter is going to be the inverse of the first. Expectations going in were simply too high.

What I find interesting is that Oracle (NASDAQ: ORCL), Red Hat (NYSE: RHT) and Research In Motion (NASDAQ: RIMM) have all taken down guidance due to the sluggishness they're starting to see in their businesses.

What the Street seems to be ignoring is that the dollar has been crushed for over a year now, which means that the currency tailwind is only getting weaker as the year drags on. If one uses $1.55 euro per dollar as a benchmark, the second-quarter effect was a 14% year-over-year currency tailwind.

In the third quarter, that drops to 10%; in the fourth, it will drop to 5%. Add in macroeconomic headwinds -- along with the fact that credit markets have been pushed back into a state of mild panic -- and it's a surefire recipe for a very tumultuous back half of the year.

I'm looking hard for reasons to be optimistic, but they seem to be thin on the ground. In the information technology (IT) sector, at least, we'll likely see a meaningful budget flush at the end of the year - if only because they'll be cut in a big way starting in 2009. This means that IT managers, if they even think they might need anything over the next year or so, need to use or lose whatever's left in their 2008 budgets come the fourth quarter.

This will create an environment where people will be calling the bottom for IT in the fourth quarter - but it's more likely to be the last hurrah before the bottom drops out.

Position in RHT

Read | Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

Oracle Corporation (NASDAQ: ORCL)
F4Q08 Earnings Conference Call
June 25, 2008 5:00 PM ET

Management Summary

Operator

Good day, everyone and welcome to today's Oracle Corporation quarterly conference call. Today's conference is being recorded. At this time, I would like to introduce Roy Lobo, Head of Investor Relations of Oracle. Please go ahead, sir.

Roy Lobo, Investor Relations

Thank you, operator. Good afternoon, everyone and welcome to Oracle's fourth quarter and fiscal year 2008 earnings conference call. This is Roy Lobo, Head of Investor Relations. With me on the call are Oracle's Chief Executive Officer Larry Ellison; Oracle's President and Chief Financial Officer Safra Catz; and Oracle's President Charles Phillips.

We will begin with a few prepared remarks and then take a few questions from the audience.

Let me begin by reminding everyone that today's discussions may include predictions, estimates, or other information that might be considered forward looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that can cause actual results to differ materially.

You are cautioned not to place undue reliance on these forward-looking statements which reflect our opinion only as of the date of this presentation. Please keep in mind that 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 events.

Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock.

A PDF copy of our press release and financial tables, which include a GAAP to non-GAAP reconciliation, can be viewed and downloaded on the Oracle investor relations website at www.oracle.com/investor.

With that I would like to turn the call over to Safra Catz for opening comments.

Safra A. Catz, President and Chief Financial Officer

Thanks, Roy and good afternoon, everyone and thanks for joining us. I'm going to focus on our non-GAAP results for Q4 and fiscal year '08. I will then review guidance for Q1 and then turn the call over to Larry and Charles for their comments.

As you can see, Oracle delivered yet another exceptionally strong quarter and ended fiscal year '08 growing earnings per share 29% and improving operating income by 30%. We started the year on a high note with the strongest first half new license growth in more than a decade. We continue that momentum into the second half, delivering license growth of 28% to $7.5 billion for the year, the highest license growth rate in any fiscal year in the past decade, including during the height of the Internet bubble.

We committed at the beginning of the year to deliver 100 to 200 basis points of margin improvement and we delivered on that commitment with our fiscal year '08 non-GAAP operating margin of 43%, up 2 points from last year. In Q4 we also achieved the highest non-GAAP operating margin in the company's history at 49%. Our non-GAAP EPS grew 29% to $1.30 for the year, well above our EPS growth plan of 20% per year.

At our size, fiscal year '08 would have been considered a great year when the economy is booming. The fact that we put up these results, in these times, demonstrates that our strategy is working and our team is executing across the board.

For the quarter, new software license revenues were up an exceptionally strong 27% to $3.1 billion. We saw broad-based geographic and product momentum. Technology new license revenues were up 23% to $2.1 billion in Q4 and up 24% to $5.1 billion for the full year. Again, this is the fastest growth rate in our technology business in more than a decade.

Geographically we grew technology license revenues 16% in the Americas, 42% in EMEA and 6% in APAC. BEA contributed $93 million to new software license revenue in the quarter, exceeding our expectations significantly as BEA customers welcome the closing of the transaction.

Our applications business delivered new license growth of 36% in Q4 and 38% growth for the full year, which is around 3X faster than SAP. We turned in a strong performance geographically, growing 33% in the Americas, 41% in EMEA and 37% in APAC.

Software license update and product support revenues were up 23% on a non-GAAP basis for the quarter to $2.9 billion, and up 23% on a non-GAAP basis to $10.5 billion for the year, exceeding for the first time the $10 billion mark on this highly profitable recurring part of our business. Our customer retention rates on this business are at a new all-time high.

Our non-GAAP operating income grew 31% to $3.5 billion in the quarter, resulting in margins of 49%. EPS grew 27% to $0.47 on a non-GAAP basis. Operating cash flows increased to $7.4 billion for the year, while free cash flow increased to $7.2 billion for the year.

In Q4, we bought back approximately 24 million shares at an average price of $20.76. For the year, we bought back about 97 million shares at an average price of $20.54, spending a total of $2 billion. The currency impact for the quarter was a positive 6 points on revenue.

Now before I turn to guidance, I want to make a few quick points about Q1:

First of all, as you all know we are up against very tough Q1 comparisons this year since we delivered 35% new software license revenue growth in Q1 of last year, on top of a great Q1 the year before. Of course, I want to remind everyone that Q1 at Oracle still ends in August.

Second, we are aware of the broader economic environment in which we operate and we can't predict the economy from one quarter to the next. We are confident in our model and our ability to deliver earnings growth in fiscal '09 and beyond, because of our broad-based, highly diversified customer base both by industry and by geography.

Last, BEA's contribution this quarter exceeded our expectations significantly, proving again that customers prefer to purchase these products from Oracle. Now we believe our BEA acquisition came precisely at the right time, financially and strategically, and the BEA support base will add to our cash flow margin and earnings story for the year.

That said, I know everyone is aware that Q1 is our first full quarter with BEA as part of Oracle, and as with every one of our past acquisitions there is always a short period of adjustment as people and products are brought together.

Now since it is hard to forecast, I thought I'd give you some specific guidance regarding BEA. As you can see from our Q4 results, we're integrating BEA very well and they have already assumed our seasonal pattern which is a very strong Q4 finish and a sequentially down Q1. As a result, we expect them to sell no more than $50 million to $60 million in new licenses in Q1.

With that, our guidance for Q1 is as follows:

New software license revenues are expected to be up 10% to 20% year over year. Total revenue is expected to be up 18% to 20% year over year on a non-GAAP basis. Total revenue on a GAAP basis is also expected to be 18% to 20%.

Non-GAAP EPS is expected to be $0.26 or$0.27. GAAP EPS for the first quarter is expected to be $0.17 to $0.18. This guidance assumes a tax rate of 29.9% in Q1 versus 30% last year.

Now if current exchange rates hold for the entire quarter that will result in 5 points of positive currency impact for Q1, but as you know, currencies are likely to fluctuate and as a result, the final result could differ significantly.

With that, I will turn the call over to Larry for his comments.

Lawrence J. Ellison, Chief Executive Officer

Thanks, Safra. Well, we like our strategy and we like our ability to execute. Execution is all about the team and this is the strongest management team we have ever had at Oracle and it is getting stronger.

We announced a new Head of Oracle Japan, Takao Endo, who joins us from IBM. He was one of the top executives at IBM Japan and we think he really strengthens our overall management team and give us very, very strong leadership at Oracle Japan going forward.

Also Steve Au-Yeung is now in charge of Oracle Asia Pacific. Steve joined us from BEA. Again, we are taking a strong management team who delivered terrific results for the last several years and we are making it stronger.

The strategy. Our strategy in technology is to remain #1 in database and increase our overall market share. We're doing that because we have better products than the competition. The Oracle databases is faster than IBM DB2 on the high end; faster and more scalable, and we deliver better cost performance than Microsoft SQL server. That's all documented by industry standard benchmarks. So we are faster on the high end, we are more scalable, more secure and we actually cost less to own and run, even than Microsoft SQL server on the low end.

We are not going to sit on our laurels; we have a major database innovation that we will announce in September of this year. It is going to be a very big and important announcement for us so we are not standing still in database.

In the middleware business, the other half of our overall technology business, we offer a complete and integrated middleware suite based on industry standards. That is conspicuously different than what our competitors offer. While IBM competes in middleware based on industry standards, their middleware components are not integrated into a suite. Microsoft competes in middleware but they don't adhere to industry standards, they have their own .NET architecture, their own C# language and again, they are not adhering to industry standards.

So we are differentiated from IBM in the fact that our components are complete and integrated and differentiated from Microsoft in that our components in middleware are standards-based.

In the applications area, we tend to compete by developing applications based on modern internet standards and service-oriented architecture, JAVA language. I mean, SAP's applications, our #1 competitor in applications, still base their development, even their newest product uses proprietary ABAP technology and not modern internet standards.

To compete in the applications business we have to go beyond just ERP, where SAP remains very strong. We are the #1 player in CRM and we are the #1 player in industry-specific applications. SAP continues to focus on ERP, where they recently announced Business ByDesign, which is an ERP product suite aimed at small business.

Our strategies, in contrast to that, are we want to sell more applications and more value is to existing mid-size and large accounts. Here we have dedicated business units in retail and telecommunications and banking. Our newly announced insurance acquisitions, our newly announced healthcare global business unit, utilities, taxation; again, our strategy to beat SAP in applications is to focus on industry standards and go beyond ERP to CRM and industry-specific applications where they are really often not competitive, often don't even have products in those areas.

We like our strategy and we believe we have the right team in place to compete effectively in the marketplace for this coming year. Charles?

Charles E. Phillips, Jr.

Thank you, Larry. The field organization executed well in Q4 and capped off another year of outperformance. For the year, we gained market share against all major competitors.

As we look forward into FY09, the pipeline indicators look positive. Our year-to-year pipeline growth for Q1 equals the growth we had a year ago. In addition, the leading indicators of future pipeline growth are pointing in the right direction. There is just a lot of activity in the Oracle ecosystem as developers, partners and customers are excited about our products and strategy.

Let me give you some of the other indicators we look at beyond the numbers that you've seen:

One example is the Oracle Technology Network, which is our developer community. We now have 4.9 million registered members, that's up 19% over the last year and 22% in BRIC countries.

We have 94% more postings on oracle.com forums, 2.2 million in total. This is where technical users discuss our more than 9,000 products. These forums, by the way, use many of our social networking technologies.

We had a 72% increase in podcast use and in live events, which is the best qualifier of a likely buyer, we had over 6,000 events last year and 340,000 attendees, up 10% from the year before, and we are getting more senior attendees.

Our largest in-person event, of course, is Oracle OpenWorld. Registration is now open. Compared to last year at this same time we are up 20% on registration numbers and we had 43,000 attendees last year. OpenWorld will be held September 21, through 25, 2008 in San Francisco. The financial analyst day, for your planning, is on Thursday, September 25. I hope to see you there.

Let me comment on some customers and achievements by product category. In database, 11g continues its momentum. We have had over 300,000 downloads since the initial release of the product back in August of 2007 and we are pleased to see that the growth of 11g adoption is about the same as 10g at the same point in its lifecycle.

Some key customers using 11g includes Northern California Power Agency, Fair Isaac, the Chicago Board Options Exchange, Edmunds.com and MobilTel which is kind of interesting, because they have more than 5 million mobile customers in Bulgaria. They upgraded to Oracle database 11g on Linux to get higher quality of service and respond to changing business needs.

We have some additional enhancements on the way for 11g that will broaden its audience such as RAC (Real Application Clusters) support for Oracle VM, real application testing will be back ported to Oracle Database 9.2 and 10.01 to help people migrate applications forward. Oracle Autoblock Release 2 will add support for some minor databases including SQL Server, Sybase and DB2.

Additional note, IDC just released their market share numbers for last year. Oracle is at 44.3%, IBM at 21%, Microsoft at 18.5% and we gained share against those two competitors and the other category; 30 years into the business, we are still gaining share.

Middleware. In middleware, the acquisition of BEA was well-received by customers and several have called to say it has pushed Oracle into a strategic category since many of them had major deployments of WebLogic for critical applications.

We also continue to see broad adoption of Fusion middleware by partners. In FY08, we signed over 90 new ISVs supporting Fusion middleware and over 30 in Q4 alone. BEA will help significantly here.

Some key wins in the quarter for us:

SOA Suite provides shared services using SOA to connect to legacy applications in conjunction with the move away from SAP to PeopleSoft HR.

HUD, or Housing and Urban Development decided on Oracle Enterprise Workflow after struggling with a lot of hand-coded workflow in Microsoft SharePoint.

Weyerhaeuser Real Estate, an IBM shop now using Oracle Fusion middleware with JDE.

And La-Z-Boy will use SOA Suite to integrate several applications to JDE.

In Enterprise Performance Management, our Hyperion product line, American Honda Finance we beat SAP and [Baji] there for financial consolidation and reporting, even though they already had a license for product from much of SAP's product line.

And Cooper Industries, we beat SAP in a mostly SAP shop.

Business intelligence. Our BI products more than doubled year to year both in the quarter and for the year as we continue to take share because of our modern, proven and integrated BI platform which can extract information from multiple sources and deliver across multiple channels with a single semantic layer to track all objects and calculations. This is the same BI platform our applications use, which is unique in the marketplace.

So we beat SAP and [Baji] at Wal-Mart, MasterCard, Hannover Insurance, USDA. We beat Cognos and IBM at Network Appliance, Merrill Lynch and JC Penney and Xilinx.

Content management, the Stellent acquisition. A big deployment at Beckman Coulter for their external website for e-commerce; we entered Ontario Ministry of Health and British Columbia Housing where we beat EMC and Documentum.

Identity and access management, PR Newswire, that's a big win over Computer Associates. Cisco, we beat Sun and CA there. ANZ Bank, we beat RSA and EMC. Seagate, we will replace Sun's IBM's solutions. The Sun installed base looks like an opportunity for us.

In the area of applications, in Q4 we released four new advance supply chain planning products; a new version of Agile PLM; a new integration center AIA, or Application Integration Architecture, linking Siebel's Trade Promotion Management with Demantra's Advanced Trade Planning. This makes 15 new AIA integrations we have delivered into the marketplace, and more are on the way.

We also recently formed two new global business units focused on specific industries. The first one was for health sciences; the second, insurance. Some key customers in health sciences that we had wins across ERP, CRM Performa in clinical applications including Pfizer, Teva Pharmaceuticals and United Health Group.

The second and more recent global business units is for insurance. We recently announced the acquisition of two companies: AdminServer and Skywire with award-winning, packaged applications for the insurance industry. This is a large opportunity just now beginning to move to packaged applications to an industry that has been primarily mainframe and custom applications. When combined with our pre-existing Siebel for Insurance, Billing and i-Flex assets, we will have a product line that spans policy administration, rating, illustration, agent desktops and billing for life, property and casualty.

We continue to land strategic, enterprisewide design wins because of the breadth of our technology products complemented by strong ERP, CRM and vertical applications. For example, I met with Morrisons earlier this week, an $18 billion grocer in the United Kingdom with 120,000 employees. Morrisons had their vertically-integrated business model because they produce and sell their own food products. Therefore they need applications ranging from manufacturing to supply chain to retail to CRM. They have decided to replace 25-year-old mainframe systems and move to Oracle for pricing, promotions, merchandising, business intelligence, financials, manufacturing, human resources because they need more flexible systems. Essentially, they are moving every key business process to an Oracle application.

Some of the key wins in the quarter in applications: so ERP, Qualcomm, we deploy our EVS and EPM technology worldwide. The University of Texas purchased a full ERP solution along with campus solutions for student administration. UTS is one of the largest university systems in the country and the largest in the State of Texas. This follows a large win at City University of New York, the third-largest. We won the University of Montreal, ICBC Bank in China and [inaudible].

In CRM we had a strong performance in the quarter, greater than 50% growth. Siebel remains the world's leading application for managing customer data. Key wins at Motorola, Enel, which is Europe's second-largest utility; Farmers' Insurance, American Airlines and Southwest Airlines.

We also had a good win for Demantra at Volvo, for G-Log and the Oracle Transportation Management; Toll Holdings which is expansion of our footprint of one of Asia's largest integrated logistics companies; JVC and First Quality Enterprise.

In Oracle Financial Services, we won HBOS, which is the 12th largest bank in the world and parent company of Bank of Scotland. That was a win over Temenos and Misys. We won Banco de Chile, where we beat Temenos and TBC Bank in Georgia which is the second-largest bank in Georgia and was a win over Misys as well.

In the retail vertical we have got a very strong retail application this quarter which more than doubled year over year. The key win there was Media-Saturn Group, the #1 consumer electronics retailer in Europe, they are also based in Germany. They will deploy our retail applications across 1,000 stores in 15 countries.

In telco, that has always been a strong vertical for us. We won SFR, a French wireless company with 17 million subscribers. That's a big replacement win of a failed billing implementation from a competitor. We won India's largest mobile operator and Lyse, which is a Scandinavian operator.

Tax and utilities, a big win at the Ohio Department of Taxation. This is a joint bid with EDS where we beat SAP. This is the first top 10 state to go with a commercial software product for taxation. It is going to be an influential reference for us.

Energias de Portugal where we beat SAP in an SAP-dominated account; and Constellation Energy, where we replaced their legacy billing system. We had a big win for [inaudible] and in CRM on-Demand against Salesforce.com we won a large Australian bank, which was hotly contested for over a year; a site for semiconductor, and a large satellite-based media company.

With that, and it's quite enough, I'll turn it back over to Roy.

Roy Lobo, Investor Relations

Thank you very much, Charles. With that we will open the line up for questions. Operator?

Q&A

Operator

(Operator Instructions) We will take our first question from Heather Bellini with UBS. Please go ahead.

Heather Bellini, UBS

Thank you and congratulations on a good Q4. Safra, I was wondering if you could comment on the rebound in the Americas this quarter, as well as in the apps segment? Obviously, you must have seen a nice rebound in deal closures in these areas versus February. I was wondering if you could comment or elaborate a little on the environment thus far in Q1? Thanks.

Safra A. Catz, President and Chief Financial Officer

As we spoke about in our Q3 announcement, which was obviously in March, we already felt very confident about how things were going, really worldwide, including in North America. We have extremely strong pipelines again, both in North America and worldwide and feel rather confident about our prospects in Q1.

It is Q1, of course, and we have extremely difficult comparisons; really, probably one of the toughest comparisons we've had in the long time since last year Q1 was a 35% growth quarter and so we always look at that.

But so far things look very good. Deals are closing. Q4 did not close everything so things have started to close already now and North America is doing very, very well as it has been really for the past few years; just consistently doing very well.

Heather Bellini, UBS

Any comments on the UK at all, if you're seeing anything change there in terms of the environment for deal closings? Or in Europe in general?

Safra A. Catz, President and Chief Financial Officer

No. We're not seeing a market slowdown at this point from our pipeline numbers, but it's extremely early in the quarter and as you know, we do a large amount of our business at the end and so we really won't see significant issues until much, much later, if they are there.

What we do have right now is our pipelines and what we've closed so far and things look good for us in Europe.

Heather Bellini, UBS

Great. Thanks and congratulations again.

Safra A. Catz, President and Chief Financial Officer

Thank you.

Roy Lobo, Investor Relations

Operator, we'll take our next question.

Operator

We will take our next question from Sarah Friar with Goldman Sachs. Please go ahead.

Sarah Friar, Goldman Sachs

Great, thanks a lot. And I echo Heather's congratulations there. Safra, your goal over the past five years has been 20% earnings growth and for at least the last four of those years you've over-delivered.

Given where you stand today, is this a reasonable goal for the company looking forward, for say the next three-plus years? And as part of that, what type of margin expansion can we think of? From an acquisition strategy perspective, will the pace continue as we have seen over the last three-plus years?

Safra A. Catz, President and Chief Financial Officer

Well, I don't think that we think that our strategy is in any way running out of gas so our model such that we have so much leverage in it, that when we sell let's say a retail application, invariably those customers also buy some of our other applications, whether CRM or ERP. Invariably they buy database and middleware and so as our global business units continue and as our product line continues to expand, these products are very synergistic.

We really feel that our strategy has a lot of time ahead of it. In fact, as far as a nine inning baseball game, I'm not sure we are even in the second inning at this point. So I think we're very optimistic long term. Larry may want to comment on that also.

As for margins, our model, again, has enormous leverage. The maintenance base continues to grow; it is extremely profitable. We have a very, very large customer base and they continue to want our newest software, which is what they get when they pay their maintenance. As that continues to grow it brings our margins up.

In addition, we benefit from the massive scale of Oracle Corporation worldwide and we benefit from the economies of scale that we get. Either as we grow or through acquisitions, we benefit from that scale and invariably we end up with some margin expansion.

Roy Lobo, Investor Relations

Thanks -

Sarah Friar, Goldman Sachs

If I may just... sorry.

Roy Lobo, Investor Relations

Go ahead.

Sarah Friar, Goldman Sachs

Okay. Can I ask one very quick follow-up, more to Heather's? As you have thought about guidance, you've spoken in prior quarters about taking a look at closure rates and trying to be more or less conservative based on some of the factors that play into different quarters. As you have thought about Q1, you have said pipelines look healthy, so far so good. But have you tried to be more conservative on closure rates to get to the guidance that you got to, in order to leave yourself a little bit of cushion should the environment get worse or just the seasonality factor play in?

Safra A. Catz, President and Chief Financial Officer

In Q3, I informed all of you that we were using extremely conservative closure rates and we were particularly cautious in our guidance because Bear Stearns was going under and all sorts of things were happening literally right around that time. We sort of changed from our regular pattern for Q3, and to our benefit things worked out much better than we guided to, simply because, I guess using those very conservative closure rates, et cetera, turned out to be unnecessary.

However, now we are just using our regular closure rates, et cetera, and we're being really just right down the middle. The guidance that you're getting is what we actually think is going to happen and we do it both bottom up and top down and it comes out as it comes out, and those are the numbers that I'm giving you at this time.

Sarah Friar, Goldman Sachs

Great. Thank you.

Roy Lobo, Investor Relations

We'll take the next question, operator.

Operator

We will take our next question from Kirk Materne with Banc of America Securities. Please go ahead.

Kirk Materne, Banc of America Securities

Thanks very much and I will add my congratulations on the quarter. Safra or Charles, can you just comment on the apps business rebound? It sounds like you guys have a large volume of deals running through your pipelines right now. Have you seen any change over the last three to six months on just the size of those deals from the ASP perspective? Do you see anybody sort of cutting back on the larger deals to have more modular deals? Can you just comment on what your thoughts are as that applies to guidance going forward? Thanks.

Charles E. Phillips, Jr.

There are definitely large deals still out there. They do take longer to close in some cases and more people want to look at them, but as you saw in Q4 we were able to get some of those done. The pipelines are there. I think as we ship more of the integrations each quarter, our story gets stronger and that actually leads to larger deals because we can sell an integrated suite of products.

The underlying driver that we've been talking about is still there, it is a little bit more cautious environment, but again we have a big enough pipeline hopefully to get through it all.

Kirk Materne, Banc of America Securities

If I could ask just one quick follow-up question. If I was going to nitpick, I guess, on any -- and there wasn't much to nitpick on - but it looked like the Asia Pac tech growth was a little bit slower than you might expect from that area of the world. Is that simply just a function of that particular market adopting 10g and some of the RAC options in that business? What is your expectation going forward for that business?

Charles E. Phillips, Jr.

Well I would say that it's partially some of those things, but we could have executed better. We have made a management change, as Larry spoke about, and as you know BEA did very well in middleware and that's one of the areas we need to do better in, in Asia, that did not go as well as we had hoped for the last quarter.

So we are hopeful and confident that we will execute better in the APAC tech business going forward. But the opportunity is there; it's not a lack of market demand.

Kirk Materne, Banc of America Securities

Great. Thanks very much.

Roy Lobo, Investor Relations

The next question, operator.

Operator

We will take our next question from John DiFucci with JP Morgan. Please go ahead.

John DiFucci, JP Morgan

Thank you. Charles, you said that the pipeline growth for Q1 was equal to that of about a year ago. I am just curious, are you talking about the percentage growth or the absolute growth?

Charles E. Phillips, Jr.

The percentage growth year over year.

John DiFucci, JP Morgan

Okay. And just quickly, I don't want to keep asking the asked question, but you've said in the past that it is a lumpy business and we've seen that happen through time here and that has been proven. But no one would argue with the apparent weakness of the macro economy. Regardless, you guys put up some really strong results here.

I am just curious, do you think you have a good view of everything out there? Do you have a broad view of what is happening? Do you think the apps business or the apps market has returned or seen a little bit of bounceback here, or do you think it has more to do with Oracle execution?

Charles E. Phillips, Jr.

I believe Safra can comment as well. I think it is more a market share gain than anything else. Our strategy is resonating with customers. We also have tremendous opportunities. We have a lot of customers who are new to Oracle, at least on an enterprisewide basis and so they have a lot of Oracle products now and the ability for us to come in and tell a different story and the value they can get by adding to that, it is just different than it was a couple years ago.

So I do think we are in a different place than everybody else.

Safra A. Catz, President and Chief Financial Officer

No, I agree with that.

John DiFucci, JP Morgan

Thank you.

Roy Lobo, Investor Relations

Next question, operator.

Operator

We will take our next question from Peter Goldmacher with Cowen & Company. Please go ahead.

Peter Goldmacher, Cowen & Company

Hi, thanks. Can you give us a bit of an update on the Fusion applications? In the past we talked about an '08 launch. We'd love to know what's going to get launched when and how you think that starts rolling through the model?

Roy Lobo, Investor Relations

Larry?

Safra A. Catz, President and Chief Financial Officer

Larry, do you want to take that?

Lawrence J. Ellison, Chief Executive Officer

Yes. I'll take it. I think no change in terms of our schedules. So we have actually launched some Fusion applications already. We have launched a variety of CRM applications based on Fusion technology, they are available as Software as a Service, maybe the most interesting one is one called Sales Prospector, which offers a capability not available with Salesforce.com. Specifically it data mines your installed base and tells you what product you should be selling to that customer next and who your best references are for selling that product.

So we have got a whole second generation set of CRM products to make salespeople more productive versus the first generation, which really would help managers do a better job forecasting their sales. So those Fusion technology based applications are actually already in the marketplace.

We will continue to deliver Fusion technology applications until ultimately we have a Fusion version of every application that we sell, but it will take some time before we get all the way through all the different applications that we offer. But there will be a suite of Fusion applications coming out this year, next year and the year after.

Peter Goldmacher, Cowen & Company

Great. Thanks, Larry.

Roy Lobo, Investor Relations

Thank you. Operator, I think we have time for one last question.

Operator

We will take our last question from Brent Thill with Citi. Please go ahead.

Brent Thill, Citi

Thanks. Safra, there's been concern over sales cycles extending now beyond what we've seen over the last year. Can you just help us better understand if there has been any change to the duration of what you've seen in the sell cycle?

Safra A. Catz, President and Chief Financial Officer

No, we're not seeing that. We're the same as always. It's really business as usual at Oracle, if not better.

Brent Thill, Citi

Okay. And for Larry, the on-Demand business is posting pretty impressive growth, 25% growth year over year. For the last three years it's been stuck in about 3% of your overall revenue. Where would you like to see that going forward as a percent of the overall revenue?

Lawrence J. Ellison, Chief Executive Officer

I'm sorry, I missed the first part of your question. What's growing at 3%?

Brent Thill, Citi

The on-Demand business grew at roughly 25%, it had a nice clip in terms of the growth rate.

Lawrence J. Ellison, Chief Executive Officer

Right.

Brent Thill, Citi

As it relates to the overall revenue stream, it's about 3% of your revenue and has been for the last three years. If you could just give us a sense of how you think about that?

Lawrence J. Ellison, Chief Executive Officer

Sure. Well again, I'll describe it as we've been in the on-Demand business for almost a decade and we're the second-largest on-Demand provider in terms of sales behind Salesforce.com.

I'll say that Q4 was the first quarter we actually made money in the on-Demand business. If you look at the on-Demand business overall, and we're enthusiastic about it, we continue to get better at it and grow the business. As you point out, it's not really growing any faster than our overall business; it's staying at a constant small percentage. We think that's going to change over time.

But the entire on-Demand industry has to get better at making money in selling on-Demand software. If you look at the leader, Salesforce.com, they don't make very much money and they've been at it for almost ten years. It is hard to point to any Software as a Service provider that's doing a good job of improving their profitability.

I think that's what we are focused on before we scale the business. The last thing we want to do is have a very large business that is not terribly profitable and drives our margins down. So we've used, if you will, our first ten years to figure out how to do this profitability and now that we are profitable in on-Demand, hopefully we will grow at a faster rate than the business as a whole.

Roy Lobo, Investor Relations

Great, thank you. Well let me thank everyone for joining us today. A telephone replay will be available for 24 hours. The replay number is 719-457-0820 and the passcode for that replay is 6677472. You can also access the webcast replay on the Oracle investor relations website. The webcast replay will be available through the close of market on July 2.

Thank you very much and with that I'll turn back to the operator for closing.

Operator

Ladies and gentlemen, this will conclude today's Oracle Corporation quarterly conference call. We do thank you for your participation and you may disconnect at this time.

Corporate Participants

Roy Lobo, Investor Relations
Safra A. Catz, President and Chief Financial Officer
Lawrence J. Ellison, Chief Executive Officer
Charles E. Phillips, Jr.

Analysts

Heather Bellini, UBS
Sarah Friar, Goldman Sachs
Kirk Materne, Banc of America Securities
John DiFucci, JP Morgan
Peter Goldmacher, Cowen & Company
Brent Thill, Citi

Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

Bed, Bath & Beyond (NASDAQ:BBBY) is up over 7% on better-than-expected earnings.

Herman Miller (NASDAQ:MLHR) is up almost 10% on a strong quarter.

RIM (NASDAQ:RIMM) is off 8% on a weak forecast.

GM (NYSE:GM) is down 5% after a downgrade from Goldman.

Oracle (NADSAQ:ORCL) is down 3% on a poor forecast for the upcoming quarter.

Stocks may trade differently in the pre-market than they do in the regular session.

Douglas A. Mcintyre is an editor at 247wallst.com.

Permalink | Email this | Linking Blogs | Comments

• New software sales in the U.S. grew 22% and overall sales in the Americas, where the U.S. dominates, grew 18% after declining last quarter. Doesn't look like companies are cutting too much spending on software, does it? Keep in mind, growth in the region was indeed slower.
  
• The segment that competes with SAP jumped 36% - a good example of Oracle's ability to bounce back.
• Sales of new software licenses climbed 27% - it's amazing how Oracle managed to turn the trend on this number that concerned investors so much in the previous quarter. If that's not a good sign for future sales, what is? And if that doesn't give confidence in management and strategy, what does?
• Operating margin for the quarter was 48% - better than Microsoft (NASDAQ: MSFT)'s, and that says it all.
  

Read | Permalink | Email this | Linking Blogs | Comments

• Jabil Circuit (NYSE: JBL) shares are up nearly 11% in premarket trading after the company reported its profit soared as revenue grew and costs declined, topping third-quarter earnings estimates. Merrill Lynch upgraded Jabil from Neutral to Buy.
  
• Red Lobster operator Darden Restaurants (NYSE: DRI) shares are up 1.9% in premarket trading after it also topped quarterly earnings estimates, postinga higher quarterly profit, boosted by the Olive Garden chain, and lower costs that helped raise operating profit at its Red Lobster chain.
• 3COM (NASDAQ: COMS) shares also rose over 6% in after-hours trading after it posted higher than expected revenue.

Permalink | Email this | Linking Blogs | Comments

Oracle (NASDAQ: ORCL) is scheduled to report Q4 EPS on June 25.

Friedman Billings says: "Our checks suggest ORCL benefited from strong seasonal trends that enabled the database business to put together strong results and the applications business to bounce back nicely."

ORCL July option implied volatility of 38 is near its 26-week average according to Track Data, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

• Walgreens (NYSE: WAG) to report Q3 earnings; conference call at 8:30am.

• FOMC to hold two-day meeting.
• Jabil Circuits (NYSE: JBL) to report Q3 earnings; conference call at 4:30pm.
• 3Com (NASDAQ: COMS) to report Q4 earnings; conference call at 5:00pm.

• Second day of two-day FOMC meeting; announcement at 2:15pm.
• Thornburg Mortgage (NYSE: TMA) to discuss valuation and accounting for recent financing transaction at 10:00am.
• Nike (NYSE: NKE) to report Q4 earnings; conference call at 5:00pm.
  
• Oracle (NASDAQ: ORCL) to report Q4 earnings; conference call at 5:00pm.
• Research in Motion (NASDAQ: RIMM) to report Q1 earnings; conference call at 5:00pm.

• PDUFA date for Eli Lilly & Co's (NYSE: LLY) and Daiichi Sankyo's new drug application for Prasugrel.
• Palm Inc (NASDAQ: PALM) to report Q4 earnings; conference call at 4:30pm.
• Micron Technology (NYSE: MU) to report Q3 earnings; conference call at 4:30pm.

• PDUFA date for Indevus Pharmaceuticals' (NASDAQ: IDEV) New Drug Application for Nebido for treatment of male hypogonadism.
• PDUFA date for Johnson & Johnson's (NYSE: JNJ) and Eisai Co's (OTC: