Oracle Hits the Ground Running With First-Quarter Results

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Oracle Corp. (NASDAQ:ORCL) closed the regular session up 1.83 percent at $33.87 per share and climbed about an additional 1 percent in post-market trading after reporting fiscal first-quarter financial results. Revenues increased 2 percent on the year to $8.4 billion, just shy of the average analyst expectation of $8.48 billion. Adjusted earnings increased 12 percent on the year to 59 cents per share, beating the average analyst estimate of 56 cents. Adjusted earnings per share set a first-quarter record for Oracle.

Adjusted revenue from new software licenses and cloud software subscriptions increased 4 percent to $1.7 billion, accounting for about 20 percent of total revenue, and adjusted revenue from license updates and product support increased 7 percent to $4.4 billion, about 52 percent of revenue. Adjusted operating income climbed 4 percent on the year to $3.7 billion on the back of a 45 percent operating margin.

The news was good but not great. Oracle demonstrated that it can grow both revenue and earnings despite ongoing economic headwinds, and, gauging by the proximity of analyst estimates to actual results, the market seems to have a firm grasp of how the company is operating.

“Those record level earnings were enabled by an operating margin of 45% for the quarter,” Oracle President and Chief Financial Officer Safra Catz said in a press release. “We also set a free cash flow record of over $6 billion in Q1, and then we returned half of that to our stockholders by repurchasing $3 billion of our shares in the quarter.” The board declared a dividend of 12 cents per share of outstanding common stock.

CEO Larry Ellison announced the company would be unveiling the In-Memory Option for the Oracle database at the Oracle Open World conference next week. According to Ellision: “Virtually every existing application that runs on top of the Oracle database will run dramatically faster by simply turning on the new In-Memory feature. Our customers don’t have to make any changes to their applications whatsoever; they simply flip on the in-memory switch, and the Oracle database immediately starts scanning data at a rate of billions or tens of billions of rows per second.”

Oracle has had a rough year to date on the stock chart. Shares were off about 4 percent through Tuesday, having taken a beating following each of the last two earnings.

Oracle Corporation Common Stock Stock Chart - ORCL Interactive Chart - Yahoo! Finance

Oracle recently got in trouble because of some advertisements it ran calling out IBM (NYSE:IBM). In the ad, Oracle claims that its new microprocessor, the Sparc T5, has “2.6x Better Performance as compared to IBM’s Power7+ AIX server.” The Sparc T5 was unveiled in March. Ellison said that its mainframe computer, the M5, is eight times faster than IBM’s competing 795 and costs 80 percent less.

From IBM’s point of view, the comparison’s aren’t accurate, and the National Advertising Division appears to agree. The organization has recommended that the Federal Trade Commission step in to settle disputes. The NAD has received at least four complaints from IBM because of the Oracle advertisements.

An Oracle spokesperson told Business Insider that it is standing by the ads: “Oracle disagrees with the decision and believes the ad is fair and accurate. The ad provides a clear and objective comparison between an IBM Power7+ AIX system and an Oracle SPARC T5 system using industry standard benchmark results that legitimately show 2.6x better performance by the Oracle system.”

IBM hasn’t yet responded to the ruling, but the NAD released a scathing press release, clearly showing the organization’s frustration with Oracle.

“NAD has reviewed three separate Oracle advertising campaigns in 2012, each featuring an overbroad and unsupported comparison between one Oracle product and one IBM product,” the release says. “In response to each challenge, Oracle sought to support broad implied claims that the Oracle line of products was superior to the IBM line by relying on the results of testing of one specific Oracle configuration against one specific IBM configuration. In each instance, NAD rejected the advertiser’s substantiation and recommended that the claim be discontinued.”

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