Software, and now hardware, maker Oracle Inc. (NASDAQ: ORCL) releases fiscal fourth quarter earnings after markets close today. Analysts’ earnings estimates for Oracle are that the company will report EPS of $0.54 on revenue of $9.5 billion. That’s a nice boost from the year ago EPS of $0.46 for Oracle and revenues of $6.9 billion.
Oracle’s $5.6 billion acquisition of Sun Microsystems is expected to have a positive impact on earnings in the fourth quarter, and that is probably what will drive the share price going forward. The acquisition of Sun puts Oracle into competition with IT mega-vendors like IBM Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ), and SAP AG (NYSE: SAP).
The company has already said that it would take on restructuring charges that could top $1 billion as a result of the Sun acquisition. At the time of the acquisition, Oracle estimated the restructuring would cost about $325 million. Earlier this month, however, the company said it expected additional charges of between $675 million and $825 million.
The additional costs are related to severance payments that reduces Sun/Oracle’s European and Asian workforce. Oracle has said that it would incur the additional charges throughout calendar year 2011.
Such a substantial cut in the company’s workforce was not anticipated at the time the acquisition of Sun closed. In fact, Oracle’s CEO debunked the idea that massive layoffs of Sun employees were even being considered.But times change and making the staff cuts now won’t hit the top line as hard, especially in Europe where the euro is still weak.
Oracle was also tagged with a whistle-blower lawsuit earlier this month that could cost the company millions of dollars. The suit claims the company overcharged the federal government by tens of millions of dollars by failing to give the feds the same discounts Oracle gave to its best commercial customers. The dollar amounts involved are not particularly onerous, but Oracle could come up with a black eye and, worse, more scrutiny of its business practices.
Oracle has posted better-than-expected earnings in more than two-thirds of its past 11 quarters, and some analysts are predicting the same level of performance for today’s report. Of course that excludes restructuring charges.
Oracle shares are down a bit more than 1% early this morning, about even with the general downward trend. The median price target for Oracle shares is $30, and the shares are currently trading around $22.50.
Title: Nike Earnings Fail to Impress Investors
(NKE)
Nike, Inc. (NYSE:NKE) reported fourth quarter 2010 earnings after the market closed yesterday. Diluted EPS came in at $1.08, better than previous estimates of $1.06, and up substantially from $0.70 in the same period a year ago. Revenues for the quarter totaled $5.1 billion, up from $4.7 billion a year ago and in line with expectations.
In related celebrity news, the company’s Nike Golf division posted a drop in revenues of 2%. Whether or not that can be attributed to Nike’s decision to stick with Tiger Woods is arguable. The company’s Cole Hahn division also saw revenues fall by 2%, and Woods doesn’t have anything to do with that division, so it seems that all the sound and fury did not signify much.
The company reported that footwear and apparel scheduled for delivery between June and November of this year totals $8.8 billion, up 7% from a year ago. Excluding the effects of a weakening euro, the increase would have been 10%. In Europe, future orders are down 2% on a revenue basis although the value of the orders would have been up 11% excluding the effect of currency changes. Revenue from future orders in China are up 19% and from emerging markets orders are up 30%.
In the company’s conference call Nike’s president and its CEO both addressed how the company plans to grow its sales in China. The company plans to move more forcefully into markets in the smaller cities and is considering introducing new products at lower price points to address those markets.
Nike remains “bullish” on China as a market for its Nike-branded products and has no plans to drop prices for those products. In smaller markets, what the company refers to as third- and fourth-tier cities, Nike says it is “looking at the [product] portfolio to help supplement” the opportunities it sees in these smaller markets.
While the earnings report was generally positive, the outlook on revenue from Europe due to a declining euro cast some doubt on the company’s projections. Analysts estimate EPS for the first fiscal quarter of 2011 at $1.14 and revenues at $5.19 billion. Unless Nike can increase its market share in Europe to offset the negative impact of the currency exchange rate the company will struggle to hit those estimates.
Shares of Nike fell 2.2%, to $70.95, in after-hours trading following the earnings report.
Paul Ausick
