Oracle's OK Despite Dollar Strength

Factoring in currency fluctuation shines a brighter light on Oracle's recent earnings.
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Did Oracle (ORCL) - Get Report slip or look strong? Hit its mark or decline? When it comes to Oracle's second quarter and the business media, only one thing seems certain: Failure is in the eye of the beholder.

The Business Press Maven, acting as the Oracle of Oracle, will tell you that those who used words like "strong" and "hit its mark" in their headlines are closer to the truth than the boo birds who tossed around words like "slip" and "decline."

If you properly factor in currency fluctuation, the stability of Oracle's maintenance business and employee stock and acquisition expenses, you'll see life on the brighter side. Subordinate these factors too deeply or leave them out altogether, and you will weep for Oracle.

The Wall Street Journal

did, weighing in with this sad little headline: "

Oracle's Net Slips as Businesses Pull Back

."

The lead was as condemning of Oracle's second quarter as the headline: "Oracle Corp.'s profit fell 1% in its second fiscal quarter, its first decline in three years, as the software maker was squeezed by a stronger dollar as well as the souring economy."

Notice that the lead merely mentions a major caveat: currency fluctuation.

Currency fluctuation is something we have to keep an eye on, because companies can both benefit from it or appear damaged by it, and the credit or blame is not really their own. You might remember that when

Caterpillar

(CAT) - Get Report

and

Deere

(DE) - Get Report

and their CEOs were everyone's little darling, The Business Press Maven screamed himself blue talking about how much they had lucked out from the weaker dollar. And luck, unlike skill, never holds.

When, later on, we get a full explanation of the impact of currency fluctuation on Oracle's earnings, we see that all was not as bad as it seemed. In fact, it was pretty good: "Oracle said net income for the period ended Nov. 30 was up 10% from the year-earlier period when measured in constant-currency values. Revenue rose 6%, but would have increased 12% had the dollar not strengthened.

"Oracle's license revenue -- a closely watched gauge of software demand that indicates how many new deals the company closed in the quarter -- fell 3% from the year-earlier period. It grew 5% in constant currency."

That's not great by Oracle's sky-high historical standards, but considering the carnage in the economy, it's pretty darn good. I'd put my hundreds and hundreds in personal savings in Oracle.

The Associated Press

had a more accurate take. Here's the headline: "

Oracle still looks strong despite 2Q earnings dip: Oracle's 2nd quarter results, outlook indicate software maker built for hard times

."

Notice too how its lead is constructed to accept a caveat in a meaningful way, one that alters the meaning of the lead: "Oracle Corp.'s earnings are weakening for the first time in years, but the business software maker still may be in reasonably good shape despite the economy's terrible condition."

So set against the company's history, Oracle's earnings were weak, but the company is, all things considered, doing well. And in the next two sentences we learn what led to a particular level of stability, including this:

"Oracle's maintenance contracts account for about half of its business, generating more than $11 billion in annual revenue -- a cushion that so for has enabled Oracle to avoid the mass layoffs and other austerity measures being imposed at many other technology companies."

Then, in rapid succession, we learn about Oracle's currency and expense issue. And while the

Journal

emphasized the declining net, blowing it up to a headline feature ("Oracle's Net Slips as Businesses Pull Back,") the

AP

did well to mention, much more modestly, that though it was its first profit decline in three years, that 1% (a fall according to the

Journal

, a "dip" to the

AP

) was "negligible."

Indeed.

Success is in the eye of the beholder.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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