Oracle Proves they are Still the One (ORCL)

Oracle (NASDAQ:ORCL) just reported profit flat despite 6% revenue growth and investors took a good look at the stock and decided that it was still The One.  Shares of ORCL are up 3% after hours.

Here's the quick and dirty from the call:

- Q2 Profit excluding items in line with estimates

- Says stronger dollar hurt revenue, profit

- Sees Q3 new software sales flat to down 10%

- Says new software license revenue fell 3%

Executives said on a conference call that they had seen a reduction in large, multi-year contracts, and that they had significantly dropped their assumptions on the number of deals which would close in the third quarter.

Oracle said that in the third quarter, revenue from new software licenses, measured at present currency rates, could be flat to 10% lower.

"People just aren't buying big ticket software applications," said Gartner analyst Kenneth Chin. But Chin added that maintenance revenue and strong sales of databases should hedge the company against the drop in I.T. expenditure, despite sharp falls in new product sales in 2009.

Oracle has made a string of large acquisitions over the past 10 years, giving the company a stream of income from maintenance revenues - fees customers need to pay in order to guarantee they get support. Oracle makes almost twice as much revenue on maintenance sales as it does from selling software products.

Analysts also praised the company for managing costs well, helping to drive operating margins to 46%.

"Oracle can't control the environment and its software sales have been impacted, but they have controlled cost effectively," said Andy Miedler, an analyst with Edward Jones.

In September, Oracle said it expected adjusted earnings of 35 cents to 36 cents a share on revenue growth of 12% to 15%, assuming constant currency rates. Analysts polled by Thomson Reuters projected adjusted earnings of 34 cents a share on revenue of $5.84 billion, up 9%.

In the second quarter, new license revenue - a key measure of software growth - dropped 3% from a year earlier, but rose 5% assuming exchange rates held steady. Oracle had predicted growth of 5% to 15% at constant currency rates.

Revenue from the Americas grew 8.6%, while sales in Europe, Middle East and Africa climbed 0.9%. Asia Pacific revenue jumped 6.2%.

Bottom line, for Oracle shareholders, management proved that they are still the one, at least good enough for a fat Star Wars kid.

SOURCE: http://money.cnn.com/news/newsfeeds/articles/djf500/200812181855DOWJONES...