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Oracle unexpectedly (NYSE:ORCL) announced its fourth quarter results for 2012 Monday after the close. Originally the release of the results was planned for the 21th of June.

Fourth Quarter Results

Oracle reported a 1% increase in its quarterly GAAP revenues to $10.9 billion. GAAP operating income grew 5% to $4.6 billion, resulting in a 8% increase in GAAP net income to $3.5 billion. Earnings per share rose 11% to $0.69 on a GAAP basis. The strength of the US dollar impacted earnings negatively by $0.03 per share and revenue growth by 4%. Oracle's software licenses revenues rose 7% to $4.0 billion and software licenses and support revenues rose 5% to $4.2 billion. Hardware systems reported a 14% drop in revenues to $1.6 billion, while service revenues fell 4% to $1.2 billion.

Full year results

For the full year of 2012 Oracle reported a 4% increase in GAAP net revenues to $37.1 billion. GAAP operating income rose 14% to $13.7 billion, while net income increased 17% to $10.0 billion. GAAP earnings per share rose 18% to $1.96.

Oracle is enthusiastic about some important developments within the company. The engineered system business more than doubled its revenues to $1 billion. The cloud business of Oracle has internally been marked as the key business to drive overall revenue growth and profitability of the company. Management and the board of directors are confident about the prospects for 2013, marked by the decision to repurchase up to $10 billion of its own shares.


Oracle ended the final quarter of 2012 with $30.7 billion in cash, equivalents and marketable securities. The company operates with $16.5 billion in short and long term debt for a net cash position of $14.2 billion. Factoring in a 4% increase in after hours trading, the company is valued at $140 billion, which implies a valuation of the operating assets of $126 billion. This values the firm at 3.4 times annual revenues and 12.6 times annual earnings.

The valuation for the enterprise software company compares to revenue multiples of 3.6 times for Microsoft (MSFT), 9.6 times for Red Hat (RHT) and 4.0 times for SAP (SAP). These competitors trade at 11, 75 and 16 times earnings, respectively.

Currently the company pays a quarterly dividend of $0.06 for an annual dividend yield of 0.9%

Investment Thesis

Investors are pleased with the latest results now trading around the $28 mark. So far in 2012 shares have traded within a relatively tight $26-$30 range for the first half of 2012. Under command of CEO Larry Ellison shares have tripled over the last decade.

An investment in Oracle seems to make sense to me. Oracle is a stable, growing enterprise software company which furthermore has a strong focus on its two growing pearls, the cloud business and the engineered system division. Both divisions have seen spectacular growth and have the capacity to make a meaningful impact on the overall results in the coming years.

Despite the $10 billion share repurchase program, which will boost earnings per share, the company has plenty of financial resources to invest or capitalize on possible acquisition opportunities.

At 12 times annual earnings I am a buyer of this financially sound and growing business.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.