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Sun Burns Oracle

The uh-oh point was hardware revenues, down 6% to $1.2B, but still better than the reported $800 million Wall St projected

Oracle performed trimly enough last quarter reporting results Thursday that tore through estimates and whisper numbers.

It plunked earnings of 75 cents a share, or $3.9 billion, up 27%, on Wall Street's plate. On a GAAP basis earnings were up 36%.

Revenues were up 13% to $10.78 billion.

The company was only supposed to do 71 cents a share on revenues of $10.75 billion according to Wall Street's consensus. Oracle itself had projected 69 cents-73 cents.

It was Oracle's very first $10 billion quarter. Growth was said to be broad-based with no material deals.

Its all-important new software license revenues were up 19% to $3.7 billion "with almost no help from acquisitions" according to Oracle president Safra Catz. Expectations were for $3.6 billion. She preened that Oracle's software sales are now bigger than IBM's, which if cut out of Blue would be a Fortune 500 company on their own.

However, new licenses in fiscal Q3 were up 29%, touching off fears that tech spending ain't hanging in there.

Product support revenues came to $4 billion, up 15%.

The uh-oh point was hardware revenues, down 6% to $1.2 billion, but still better than the reported $800 million Wall Street projected. Oracle previously bragged hardware would be up 6%-12%.

Oracle's stock dropped 6% after-hours and settled down 4% at $31.16 despite Catz's claim that Oracle "clearly exceeded even our own high expectations for Sun's business."

Sun is believed to be suffering from IBM and HP continually running off with its customers.

Ex-HP CEO Mark Hurd, who's now running the old Sun operation, said Oracle is selling less hardware at better margins or as Catz put it, it's in business to "make money, not revenues."

Sun has been "aggressively" dumping third-party gear like LSI and Hitachi storage and Hurd has added salespeople, 800 last quarter, to increase coverage, claiming Oracle is under-distributed.

There are now more than 1,000 Exadata machines installed worldwide, a plateau Oracle means to triple. Evidently Exalogic machines are selling better than the Exadata appliances.

Oracle's non-GAAP operating margin was a narrowed 48% and its non-GAAP operating income was up 19% to $5.2 billion. Catz said Oracle would return to pre-Sun margins soon.

Since it's the end of Oracle's year it said its GAAP total revenues were up 33% to $35.6 billion while non-GAAP total revenues were up 33% to $35.9 billion, new software licenses hit $9.2 billion in the year and it sold $4.4 billion worth of hardware pushing GAAP net income up 39% to $8.5 billion, or $1.67 a share, and non-GAAP net income up 34% to $11.4 billion, or $2.22 a share.

Oracle CEO Larry Ellison was quoted as saying in a canned statement that the company's "database business experienced its fastest growth in a decade" in FY11. New cloud and in-memory features reportedly led to increased sales. It's now moving into Big Data.

Live on the conference call, Ellison said current valuations "don't make sense" and potential acquisitions are "not attractively priced" so the company is focusing on organic growth despite the $29 billion it's got in the bank. Catz claimed Oracle had a "lot of leverage left in its model."

Ellison is promising to take share from SAP and Salesforce.com.

Oracle is forecasting sales this summer of $10.75 billion-$10.88 billion returning 45 cents-48 cents. Catz said new licenses would be up 10%-20% with hardware falling somewhere between negative 5% and up 5%.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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