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Oracle Blows Past the Street: Investors Have To Be Lovin' It

Wednesday, 25 Jun 2008 | 4:57 PM ET

You look at Oracle, you see a company at nearly a 7-year-high, and you wonder whether the company was over-bought, and whether investors were getting a little ahead of themselves.

Nope.

Not only did Oracle beat the Street by 3 cents, reporting 47 cents instead of the 44 cents analysts expected, but the company soared past revenue consensus as well: $7.2 billion against the $6.86 billion expected. But you have to deeper into the spreadsheet to see just how good these numbers truly are.

New software sales, a key metric, jumped to $3.14 billion, versus the $2.48 billion a year ago, and the $2.91 billion the Street was looking for. In fact, software licenses jumped 27 percent year over year when Oracle's own guidance suggested a range of between 10 percent and 20 percent. Middleware and database licenses increased 24 percent and new applications licenses rose a whopping 38 percent.

And check out the company's operating margin. The company reports 48 percent on the quarter; 43 percent for its full fiscal year. These are better margins than Microsoft has.

"The results look very clean, very encouraging. They show a nice improvement and recovery in the applications side of the business (from the March quarter)," says Pacific Crest's Brendan Barnicle. "It is Oracle's fourth quarter. I always caution investors about reading too much into that. Oracle can pull through a lot of business in the quarter...Customers recognize they can get the best discounts of the year in this period."

I'm sorry, but aren't we supposed to be in a recession, or heading toward one? The company's performance inside and outside the United States was exceptional, and it is seeing no softness in the United States. In fact, its revenue in the Americas increased to $3.018 billion, or about $700 million more than in the prior quarter.

It's a huge quarter, any which way you look at it. Just what Larry Ellison needed.

"Nobody expected the May quarter to come in as strong as it did," says David Garrity of Dinosaur Research. Larry is just going to have to buy a bigger boat."

Keep this up, and a lot of Oracle investors may be in the market for his hand-me-downs.

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