Oracle Corporation (NASDAQ:ORCL) has just reported Q1FY13 results with license revenue slightly better than consensus but lighter across all other revenue line items with hardware products considerably worse. Operating margin and EPS were in-line with consensus estimates. EPS excluding certain items came in at $0.53, while revenue was $8.18 billion. Analysts had estimated EPS of $0.53, and revenue of $8.3 billion.

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The modestly better License revenue of $1.574B was spot on in terms of the consensus number, and is very helpful in offsetting the misses elsewhere. Surprisingly, the company did not beat on profitability and EPS (as was the case in most quarters in the past). Given the recent strong performance of the stock, we are not sure that these results are strong enough to maintain the momentum. Even though this was the smallest quarter of the year and comps are getting easier going forward, the magnitude of the hardware products miss and the fact that application license revenue has not been broken out will raise questions again. 

Americas led the license performance, up 14% while not surprisingly up just 1% on a CC basis and Asia remained strong at +12%. The company removed technology vs. apps license disclosure thus it is difficult to determine the drivers of growth in the quarter. Maintenance revenue growth of 8% on a CC basis was inline with what analysts  expected, but optically hurt more by currency and declining Q/Q.

Hardware revenue takes another leg down – Hardware product revenue of $779 was significantly below our $941M and street $899M estimates, declining 24% Y/Y in a quarter that was supposed to show some stability. This line doesn’t drive
material profitability but it has become a credibility issue and will fuel concern about the Exa-appliances, even though the release quotes growth there of 100% Y/Y.

Controlled costs save earnings – Sales and marketing expense was below what analysts modeled and gross margins were better, driving 120bp of operating margin upside. This, despite the revenue shortfall ($8.1 vs. our $8.4B) drove EPS of $0.53, which was inline with most estimates.

Also See:  Oracle Continues To Offer Innovation By Buying New Companies

Shares of Oracle Corporation  (NASDAQ:ORCL) are trading at $32.22, practically even, in after-hours trading.

(Disclosure: no positions in any securities mentioned)