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Oracle's (NYSE:ORCL) earnings were no surprise, as they were pre-announced last week. So here are some of our highlights from the conference call:

Applications came in very strong across the board, generating license revenues of $641 million, that is 83% up year-over-year, both in US dollars and constant currency. This compares to 14% growth constant currency in SAP’s most recent quarter.

Well, they compare it to SAP’s “most recent quarter.” However, SAP will report the comparable quarter next week. Then we will get a better idea of any share shifts going on.

Operating cash flows increased by $1 billion year-over-year while free cash flow increased 28%. DSO was 55 days, down two days from last year, showing folks are paying their bills. In summary, I could only say that a year ago we gave you guidance for the year, and we clearly exceeded it at every level.

Their commentary and guidance on free cash flow excludes the cost of acquisitions. Although this is the customary practice, we would argue that they should include acquisitions in free cash flow (there would be none left) given the large number and size of recent deals and on the basis that if their contribution to operating cash flow is included so should be the impact on their investing cash flows.

As for Q1, our guidance is as follows. While we feel very good about our prospects heading into FY07, Q1 is typically our smallest seasonal quarter, being June, July, August. So we’re going to set guidance as follows:

New software license revenue for the quarter are expected to be up 18% to 25% year-over-year. Total software revenues are expected to be up 18% to 20% on a non-GAAP basis. Software revenues on a GAAP basis are expected to be up 23% to 25%. Total revenue for Q1 is expected to be up 19% to 20% year-over-year on a non-GAAP basis. On a GAAP basis, it’s expected to be up 22% to 24%.

Consensus estimates had called for a 16 percent rise in total revenues.

Non-GAAP EPS for the first quarter is expected to be $0.16 per share as compared to $0.14 last year. GAAP EPS for the first quarter is expected to be $0.11 per share, up from $0.10. This translates into a non-GAAP net income growth of 11% to 15% and GAAP net income growth of 9% to 14%.

Well this is all inline.

Now, this guidance assumes an annual effective income tax rate of 30%, up from 29.2% in Q1 last year, due to the shift in the mix of earnings from our foreign sub. That alone is a $0.01 for Q1.

It also assumes one point of positive currency impact, because that is where we stand right now; but with currency fluctuations, it’s difficult to predict and we’re not trying to predict, we’re just telling you year-over-year where it is right now. It could vary from our current estimate.

Now in Q1, we’re going to adopt FAS 123-R. Our Q1 GAAP guidance currently assumes comp expense of approximately $50 million for the option. We expect stock compensation to reduce diluted earnings per share in FY07, about $0.02 to $0.03.

Kash Rangan of Merrill Lynch asked what is driving the strong license revenue. Management said that their progress toward suites that include several best-of-breed applications under one installation is reducing complexity for their customers.

In response to a Bear Stearns question, management professed no insight as to how much of the recent improvement was company-specific rather than an overall increase in IT spending.

ORCL 1-yr chart:

ORCL 1-yr chart

Source: Oracle Update -- William Trent's Highlights from their Most Recent Conference Call (ORCL)