Oracle Corp. (NYSE: ORCL – $46.50) said total revenue for the third quarter was $9.27 billion, up 2% and a bit better than Street views, as it continues to benefit from its transition to cloud-based products. Cloud revenues came in at $1.2 billion, up 62% from last year’s third period and total Cloud and On-Premise Software revenues were $7.4 billion, up 4%. Adjusted operating income was up 3% to $3.9 billion with an operating margin of 43%. Earning per share was $0.69, up 7% from last year’s tally of $0.64 and seven cents ahead of analysts’ estimates. Oracle also raised its dividend by 27%, to $0.19 per share per quarter, equal to an annual yield of 1.6%.
Oracle, trading at an all-time high, expects earnings for the fourth quarter in the range of $0.78 to $0.82 per share, in line to above the analyst consensus of $0.78 to close the year at $2.63 on an adjusted basis. Earnings of $2.84 are likely next year equal to a reasonable 16 times estimated earnings.
The landscape is competitive in the cloud arena, with players like salesforce.com offering a strong game on the Software-as-a Service side, while Microsoft and Amazon Web Services are, and will continue to be, formidable on the Platform-as-a-Service and Infrastructure-as-a Service side. Still, I like Oracle’s positioning in the cloud, coupled with its large presence in the database business, thus providing a degree of differentiation and a competitive advantage. The shares can be held for decent, conservative total returns to late decade.