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Oracle Becomes the Second Largest Cloud SaaS Company in the World

REDWOOD SHORES, CA--(Marketwired - Jun 19, 2014) - Oracle Corporation ( NYSE : ORCL ) today announced that fiscal 2014 Q4 total revenues were up 3% to $11.3 billion. Software and Cloud revenues were up 4% to $8.9 billion. GAAP Cloud software-as-a-service (SaaS) and platform-as-a-service (PaaS) revenues were up 25% to $322 million, while non-GAAP SaaS and PaaS revenues were up 23% to $327 million. In addition, Cloud infrastructure-as-a-service (IaaS) revenues were up 13% to $128 million. New software licenses revenues were unchanged at $3.8 billion. Software license updates and product support revenues were up 7% to $4.7 billion. Overall hardware systems revenues were up 2% to $1.5 billion with hardware systems products up 2% to $870 million, and hardware systems support up 2% to $596 million.

In Q4, both GAAP and non-GAAP earnings per share were lowered by $0.02 due to a non-operating loss caused by exchange rate changes in Venezuela. Furthermore, last year's Q4 GAAP earnings per share increased $0.04 because of a $269 million acquisition price reduction. As a result of these two factors, Q4 GAAP earnings per share were unchanged at $0.80 compared with last year, while GAAP net income was down 4% to $3.6 billion, and GAAP operating income was down 2% to $4.9 billion. Q4 GAAP operating margin was 43% in the quarter. Non-GAAP earnings per share were up 6% to $0.92, but would have been $0.94 if not for the currency loss in Venezuela. Non-GAAP net income was up 2% to $4.2 billion while non-GAAP operating income was up 3% to $5.8 billion. The non-GAAP operating margin was 51%. GAAP operating cash flow on a trailing twelve-month basis was $14.9 billion.

For fiscal year 2014, total revenues were up 3% at $38.3 billion. GAAP Software and Cloud revenues were up 5%. GAAP Cloud SaaS and PaaS revenues were up 23% to $1.1 billion while Cloud IaaS revenues were $456 million. New software licenses revenues were unchanged at $9.4 billion while software license updates and product support revenues were up 6% to $18.2 billion. Total hardware system revenues were flat at $5.4 billion. GAAP operating income was up 1% to $14.8 billion, and GAAP operating margin was 39%. Non-GAAP operating income was up 3% to $18.1 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $11.0 billion, while non-GAAP net income was up 2% to $13.2 billion. GAAP earnings per share were $2.38, up 5% compared to last year while non-GAAP earnings per share were $2.87, up 7%.

"Our cloud subscription business is now approaching a run rate of $2 billion a year," said Oracle President and CFO Safra Catz. "As our business has transitioned, more software revenues are being recognized over the life of a subscription rather than upfront. We're making this transition to cloud subscriptions and ratable revenue recognition while continuously increasing our top-line revenue and our bottom-line profits year-after-year."

"We have transformed Sun's commodity hardware business into a profitable and growing Engineered Systems business," said Oracle President Mark Hurd. "Our overall hardware business grew 2% in constant currency this past year. We saw record levels of Engineered Systems shipments and expect to deliver our 10,000th unit in Q1."

"Oracle is now the second largest SaaS company in the world," said Oracle CEO Larry Ellison. "In SaaS, we're in front of everybody but salesforce.com. In IaaS we're larger and more profitable than Rackspace. We have by far the most complete portfolio of modern SaaS and PaaS products in the industry: CRM: Sales, Service & Marketing; HCM: HR, Payroll & Talent; ERP: Accounting, Procurement, Supply Chain & more. All these SaaS products run on the world's most powerful PaaS: the Oracle in-memory multitenant database and Java. We plan to increase our focus on the Cloud and become number one in both the SaaS and the PaaS businesses."

The Board of Directors declared a quarterly cash dividend of $0.12 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 9, 2014, with a payment date of July 30, 2014.

Q4 Fiscal 2014 Earnings Conference Call and Webcast

Oracle will hold a conference call and webcast today to discuss these results at 2:00 p.m. Pacific. You may listen to the call by dialing (913) 312-6699, Passcode: 822011. To access the live webcast of this event, please visit the Oracle Investor Relations website at http://www.oracle.com/investor. In addition, Oracle's Q4 results and Fiscal 2014 financial tables are available on the Oracle Investor Relations website.

A replay of the conference call will also be available by dialing (719) 457-0820 or (888) 203-1112, Passcode: 1625971.

About Oracle
Oracle engineers hardware and software to work together in the cloud and in your data center. For more information about Oracle ( NYSE : ORCL ), visit www.oracle.com or contact Investor Relations at investor_us@oracle.com or (650) 506-4073.

Trademarks
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

"Safe Harbor" Statement: Statements in this press release relating to Oracle's future plans, expectations, beliefs, intentions and prospects, including statements regarding our cloud subscription run rate, the timing of the delivery of our 10,000th Engineered Systems unit, and our plans to increase our focus on the Cloud and become number one in SaaS and PaaS, are "forward-looking statements" and are subject to material risks and uncertainties. Many factors could affect our current expectations and our actual results, and could cause actual results to differ materially. We presently consider the following to be among the important factors that could cause actual results to differ materially from expectations: (1) Economic, political and market conditions, including the continued slow economic recovery in the U.S. and other parts of the world, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price. (2) We may fail to achieve our financial forecasts due to such factors as delays or size reductions in transactions, fewer large transactions in a particular quarter, unanticipated fluctuations in currency exchange rates, delays in delivery of new products or releases or a decline in our renewal rates for support contracts. (3) Our cloud computing strategy, including our Oracle Cloud Software-as-a-Service, Platform-as-a-Service and Infrastructure-as-a-Service offerings, may not be successful. (4) If we are unable to develop new or sufficiently differentiated products and services, or to enhance and improve our products and support services in a timely manner or to position and/or price our products and services to meet market demand, customers may not buy new software licenses, cloud software subscriptions or hardware systems products or purchase or renew support contracts. (5) Our international sales and operations subject us to additional risks that can adversely affect our operating results, including risks relating to foreign currency gains and losses. (6) If the security measures for our software, hardware, services or Oracle Cloud offerings are compromised or if such offerings contain significant coding, manufacturing or configuration errors, we may experience reputational harm, legal claims and financial exposure. (7) We have an active acquisition program and our acquisitions may not be successful, may involve unanticipated costs or other integration issues or may disrupt our existing operations. A detailed discussion of these factors and other risks that affect our business is contained in our SEC filings, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings on Oracle's Investor Relations website at http://www.oracle.com/investor. All information set forth in this press release is current as of June 19, 2014. Oracle undertakes no duty to update any statement in light of new information or future events.

                           
                           
ORACLE CORPORATION
                           
Q4 FISCAL 2014 FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
                           
  Three Months Ended May 31,        
  2014     % of Revenues   2013     % of Revenues   % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (1)
REVENUES                              
  New software licenses $ 3,769     33%   $ 3,769     35%   0%   (1%)
  Cloud software-as-a-service and platform-as-a-service   322     3%     257     2%   25%   25%
  Cloud infrastructure-as-a-service   128     1%     113     1%   13%   13%
  Software license updates and product support   4,695     42%     4,402     40%   7%   6%
    Software and Cloud Revenues   8,914     79%     8,541     78%   4%   4%
  Hardware systems products   870     8%     849     8%   2%   3%
  Hardware systems support   596     5%     582     5%   2%   2%
    Hardware Systems Revenues   1,466     13%     1,431     13%   2%   3%
    Services Revenues   940     8%     975     9%   (4%)   (3%)
      Total Revenues   11,320     100%     10,947     100%   3%   3%
                               
OPERATING EXPENSES                              
  Sales and marketing   2,241     20%     2,125     19%   6%   5%
  Cloud software-as-a-service and platform-as-a-service   137     1%     101     1%   36%   35%
  Cloud infrastructure-as-a-service   84     1%     76     1%   10%   11%
  Software license updates and product support   303     3%     316     3%   (4%)   (4%)
  Hardware systems products   443     4%     413     4%   7%   8%
  Hardware systems support   205     2%     220     2%   (7%)   (6%)
  Services   759     7%     785     7%   (3%)   (3%)
  Research and development   1,349     12%     1,264     12%   7%   7%
  General and administrative   265     2%     274     2%   (3%)   (3%)
  Amortization of intangible assets   568     5%     596     5%   (5%)   (5%)
  Acquisition related and other (2)   20     0%     (257 )   (2%)   108%   108%
  Restructuring   37     0%     34     0%   8%   4%
      Total Operating Expenses   6,411     57%     5,947     54%   8%   8%
                               
OPERATING INCOME   4,909     43%     5,000     46%   (2%)   (3%)
  Interest expense   (239 )   (2%)     (210 )   (2%)   14%   14%
  Non-operating (expense) income, net   (81 )   0%     35     0%   328%   324%
                               
INCOME BEFORE PROVISION FOR INCOME TAXES   4,589     41%     4,825     44%   (5%)   (6%)
  Provision for income taxes   943     9%     1,018     9%   (7%)   (8%)
                               
NET INCOME $ 3,646     32%   $ 3,807     35%   (4%)   (5%)
                               
EARNINGS PER SHARE:                              
  Basic $ 0.81         $ 0.81              
  Diluted $ 0.80         $ 0.80              
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                              
  Basic   4,475           4,684              
  Diluted   4,569           4,756              
                               
(1) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Movements in international currencies relative to the United States dollar during the three months ended May 31, 2014 compared with the corresponding prior year period increased our operating income by 1 percentage point.
   
(2) Acquisition related and other expenses for the quarter ended May 31, 2013 included a net benefit of $269 million due to an acquisition related item.
   
   
   
 
ORACLE CORPORATION
 
Q4 FISCAL 2014 FINANCIAL RESULTS
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in millions, except per share data)
                                                   
  Three Months Ended May 31,     % Increase (Decrease)
in US $
  % Increase (Decrease) in Constant Currency (2)
  2014 GAAP     Adj.     2014 Non-GAAP     2013 GAAP     Adj.     2013 Non-GAAP     GAAP   Non-GAAP   GAAP   Non-GAAP
                                                               
TOTAL REVENUES (3) (4) $ 11,320     $ 6     $ 11,326     $ 10,947     $ 14     $ 10,961     3%   3%   3%   3%
                                                               
TOTAL SOFTWARE AND CLOUD REVENUES (3) $ 8,914     $ 5     $ 8,919     $ 8,541     $ 10     $ 8,551     4%   4%   4%   4%
  New software licenses   3,769       -       3,769       3,769       -       3,769     0%   0%   (1%)   (1%)
  Cloud software-as-a-service and platform-as-a-service (3)   322       5       327       257       8       265     25%   23%   25%   23%
  Cloud infrastructure-as-a-service   128       -       128       113       -       113     13%   13%   13%   13%
  Software license updates and product support   4,695       -       4,695       4,402       2       4,404     7%   7%   6%   6%
                                                               
TOTAL HARDWARE SYSTEMS REVENUES (4) $ 1,466     $ 1     $ 1,467     $ 1,431     $ 4     $ 1,435     2%   2%   3%   2%
  Hardware systems products   870       -       870       849       -       849     2%   2%   3%   3%
  Hardware systems support (4)   596       1       597       582       4       586     2%   2%   2%   2%
                                                               
TOTAL OPERATING EXPENSES $ 6,411     $ (841 )   $ 5,570     $ 5,947     $ (559 )   $ 5,388     8%   3%   8%   3%
  Stock-based compensation (5)   216       (216 )     -       186       (186 )     -     16%   *   16%   *
  Amortization of intangible assets (6)   568       (568 )     -       596       (596 )     -     (5%)   *   (5%)   *
  Acquisition related and other   20       (20 )     -       (257 )     257       -     108%   *   108%   *
  Restructuring   37       (37 )     -       34       (34 )     -     8%   *   4%   *
                                                               
OPERATING INCOME $ 4,909     $ 847     $ 5,756     $ 5,000     $ 573     $ 5,573     (2%)   3%   (3%)   2%
                                                               
OPERATING MARGIN %   43 %             51 %     46 %             51 %   (231) bp.   (2) bp.   (255) bp.   (24) bp.
                                                               
INCOME TAX EFFECTS (7) $ 943     $ 308     $ 1,251     $ 1,018     $ 266     $ 1,284     (7%)   (3%)   (8%)   (4%)
                                                               
NET INCOME $ 3,646     $ 539     $ 4,185     $ 3,807     $ 307     $ 4,114     (4%)   2%   (5%)   1%
                                                               
DILUTED EARNINGS PER SHARE $ 0.80             $ 0.92     $ 0.80             $ 0.87     0%   6%   (1%)   5%
                                                               
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   4,569       -       4,569       4,756       -       4,756     (4%)   (4%)   (4%)   (4%)
                                                               
(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable GAAP measures, the reasons why management uses these measures, the usefulness of these measures and the material limitations on the usefulness of these measures, please see Appendix A.
                                         
(2) We compare the percent change in the results from one period to another period using constant currency disclosure. We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the exchange rates in effect on May 31, 2013, which was the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods.
                                         
(3) As of May 31, 2014, approximately $3 million in estimated revenues related to assumed cloud software-as-a-service and platform-as-a-service contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
                                         
(4) As of May 31, 2014, approximately $2 million in estimated revenues related to hardware systems support contracts will not be recognized for fiscal 2015 due to business combination accounting rules.
                                         
(5) Stock-based compensation was included in the following GAAP operating expense categories:
                                         
    Three Months Ended   Three Months Ended
    May 31, 2014   May 31, 2013
    GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
  Sales and marketing $ 46   $ (46 )   $ -   $ 33   $ (33 )   $ -
  Cloud software-as-a-service and platform-as-a-service   3     (3 )     -     2     (2 )     -
  Cloud infrastructure-as-a-service   1     (1 )     -     2     (2 )     -
  Software license updates and product support   6     (6 )     -     5     (5 )     -
  Hardware systems products   1     (1 )     -     1     (1 )     -
  Hardware systems support   1     (1 )     -     1     (1 )     -
  Services   12     (12 )     -     6     (6 )     -
  Research and development   101     (101 )     -     93     (93 )     -
  General and administrative   45     (45 )     -     43     (43 )     -
    Subtotal   216     (216 )     -     186     (186 )     -
  Acquisition related and other   7     (7 )     -     4     (4 )     -
    Total stock-based compensation $ 223   $ (223 )   $ -   $ 190   $ (190 )   $ -
                                         
(6) Estimated future annual amortization expense related to intangible assets as of May 31, 2014 was as follows:
   
  Fiscal 2015 $ 1,934                                  
  Fiscal 2016   1,337                                  
  Fiscal 2017   741                                  
  Fiscal 2018   607                                  
  Fiscal 2019   508                                  
  Thereafter   980                                  
    Total intangible assets subject to amortization   6,107                                  
  In-process research and development   30                                  
    Total intangible assets, net $ 6,137                                  
                                         
(7) Income tax effects were calculated reflecting an effective GAAP tax rate of 20.5% and 21.1% in the fourth quarter of fiscal 2014 and 2013, respectively, and an effective non-GAAP tax rate of 23.0% and 23.8% in the fourth quarter of fiscal 2014 and 2013, respectively. The differences between our GAAP and non-GAAP tax rates in the fourth quarter of fiscal 2014 and 2013 were primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets.
                                         
* Not meaningful                                      
                                         
                                         
                                         
...
ORACLE CORPORATION
                           
FISCAL 2014 YEAR TO DATE FINANCIAL RESULTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions, except per share data)
                           
  Year Ended May 31,        
  2014     % of Revenues   2013     % of Revenues   % Increase (Decrease) in US $   % Increase (Decrease) in Constant Currency (1)
REVENUES                              
  New software licenses $ 9,416     25%   $ 9,411     25%   0%   1%
  Cloud software-as-a-service and platform-as-a-service   1,121     3%     910     3%   23%   24%
  Cloud infrastructure-as-a-service   456     1%     457     1%   0%   1%
  Software license updates and product support   18,206     47%     17,142     46%   6%   7%
    Software and Cloud Revenues   29,199     76%     27,920     75%   5%   5%
  Hardware systems products   2,976     8%     3,033     8%   (2%)   (1%)
  Hardware systems support   2,396     6%     2,313     6%   4%   5%
    Hardware Systems Revenues   5,372     14%     5,346     14%   0%   2%
    Services Revenues   3,704     10%     3,914     11%   (5%)