Earnings Preview: Oracle

Oracle (ORCL) is expected to report Q4 earnings after the market close on Tuesday, June 23 with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is 44c for EPS and $6.47B for revenue, according to First Call. Guidance is for EPS of 42c-46c and for revenues down 10%-14%, or $6.26B-$6.55B.

Analyst Views

Citigroup expects Oracle to close out FY09 on a positive note as the seasonally strong Q4 benefits from motivated sales reps, early stabilizing macro vs. conservative enough guidance, and lesser FX headwinds. While Q4 earnings usually bring concerns about a seasonal drop-off in Q1, Citi believes prospects for economic recovery and upcoming close of Sun Microsystems acquisition will outweigh those issues. The firm expects Q4 results in the upper half of or slightly above guidance range. Citi's estimates are EPS of 45c, revenue of $6.54B (10% decline year-over-year), license revenues of $2.46B (22% decline), and an operating margin of 50%. Looking forward, Citi is modeling for a seasonal drop in revenues to $5.16B, license revenue of $991M and PF EPS of 30c.

RBC Capital is expecting an in-line Q4 and believes this quarter the tone still remains somewhat cautious, but the firm's sense is that investors view estimates as realistic and achievable, particularly given Oracle's track record of execution, a tailwind from forex since guidance, a persistent focus on costs and continued strong maintenance renewals.

Key issues for the conference call: With the Sun Microsystems acquisition over, investors will be looking for insight into Oracle's long-term strategy. Commentary is also expected on its efforts in virtualiztion with its recent acquisition of Virtual Iron.