Oracle Corp. (NYSE: ORCL – $53.06) beat third-quarter revenue and profit estimates, as the business software provider benefited from demand for its cloud services and license support business. Oracle has been aggressively pushing into cloud computing to make up for a late entry to the fast-growing business that helps companies move away from the traditional and costlier on-premise model. This includes a string of purchases such as NetSuite. Revenue from Oracle’s cloud services and license support, its biggest, rose one percent to $6.66 billion. Total revenue dipped 0.6% to $9.61 billion but beat analysts’ average estimate of $9.59 billion. Excluding items, the company earned $0.87 per share compared to $0.83 a year ago and ahead of the average analyst estimate of $0.84. Operating expense fell 2.3 percent to $6.22 billion pushing the company’s operating margin up to 44%. Oracle also said it plans to boost its quarterly disbursement to 24 cents a share from 19 cents, for a 26% increase.
The database transition to cloud computing is a long-term game. However, Oracle should continue to have a large degree of success here, given its longstanding customer relationships and the price/performance its systems offer. Revenue, net income and cash flow should be able to advance moderately over time, with per-share figures benefiting from share buybacks. The stock yields 1.43% and estimated full-year earnings per share of $3.41 provide a reasonable PE ratio of 16 at current levels. Hence, shares of ORCL offer patient conservative investors a respectable risk-adjusted return in the years to come.