Click here to close now.




















Welcome!

News Feed Item

Fitch Affirms Oracle at 'A+' & Rates Sr. Note Offering 'A+'; Outlook Stable

Fitch Ratings has affirmed the ratings of Oracle Corp. (Oracle) at 'A+', including the long-term Issuer Default Rating (IDR). The affirmation follows the company's announcement that it will access the debt capital markets. The net proceeds of the proposed offering will be used for general corporate purposes, including stock repurchases, dividends, future acquisitions, including Oracle's pending acquisition of MICROS Systems, Inc. (MICROS; expected to close in the second half of 2014), and repayment of debt (including the 3.75% senior notes due July 2014; $1.5 billion principal amount outstanding).

Furthermore, Fitch has assigned an 'A+' rating to Oracle's proposed issuance of senior unsecured notes. The Rating Outlook is Stable. A full list of ratings follows at the end of this press release.

The rating actions affect approximately $27 billion of total debt, including the company's undrawn $3 billion unsecured revolving credit facility (RCF).

KEY RATING DRIVERS

The Ratings and Outlook reflect:

--Significant financial flexibility, with cash and investments totaling $38.8 billion as of May 31, 2014 ($35.2 billion offshore), an undrawn $3 billion RCF due 2018 and sustained annual free cash flow (FCF) after dividends in excess of $11 billion in the past three fiscal years (FYs). Oracle reported FCF of $12.2 billion in FY 2014 (May 31), in-line with Fitch's expectations.

--Strong customer attach-and-renewal rates for software maintenance, resulting in a steadily increasing, highly profitable (93% gross margin) recurring revenue stream that significantly reduces FCF volatility. Despite flat new license revenue, software maintenance grew 6.2% and accounted for nearly 48% of total revenue in FY 14.

--Strong competitive position, especially in database and middleware software.

--Conservative financial policies and strong credit protection metrics.

--Size and diversity with respect to its installed software base and significant switching costs associated with mission-critical enterprise software.

--Established track record of integrating acquisitions.

Fitch's rating concerns are:

--Competition from open-source software and long-term profitability of Oracle's SaaS and PaaS offerings (cloud subscriptions) relative to traditional on-premise software.

The direct controllable profit on new software licenses and cloud subscriptions, excluding stock-based compensation, declined 8% to $3.7 billion in fiscal 2014. The decline reflects: i) a revenue mix shift toward cloud subscriptions and associated delay in revenue recognition compared with a traditional license; and ii) a 500 basis points decline in the controllable gross margin for cloud subscriptions to 60.2% due to incremental expenses to support cloud subscription growth.

Fitch believes Oracle has and will continue to make significant investments, both organic and inorganic, to retain its long-term competitiveness relative to other cloud subscription providers. Oracle's cloud subscription revenue was $1.1 billion in fiscal 2014, or more than 10%, of aggregate revenue from new licenses and cloud subscriptions.

--Aggressive acquisition strategy; however, Fitch expects the company will remain disciplined with its strategy and, in the event of a major debt-financed acquisition, will reduce leverage using FCF in lieu of meaningful share repurchases.

--Material and sustained growth in cash returned to shareholders via stock repurchases and dividends since fiscal 2012 as well as U.S. acquisitions increase Oracle's external U.S. funding requirements due to significant offshore cash and FCF generation that is subject to incremental taxation upon repatriation. As of May 31, 2014, $35.2 billion, or 91%, of Oracle's total cash and investments of $38.8 billion was held by foreign subsidiaries.

RATING SENSITIVITIES

Positive:

Fitch believes the company's lack of a strategic rationale to maintain a higher rating at the expense of financial flexibility required for acquisitions limits further positive rating actions.

Negative:

--Fitch believes Oracle currently has the financial flexibility to issue up to $10 billion in incremental debt at the 'A+' rating. Debt issuance in excess of $10 billion or deterioration in financial performance would result in negative rating actions.

--Inability to adapt to major technology transitions, such as SaaS, PaaS or any emerging database technologies.

Fitch believes Oracle's liquidity is strong even after discounting the offshore cash for incremental taxes payable upon repatriation. The significant $35.2 billion of offshore cash reflects a considerable portion of FCF being derived outside the U.S., while significant U.S. funding is required for share repurchases, acquisitions and dividends.

Fitch estimates pro forma leverage (debt/operating EBITDA) of 1.5x as of May 31, 2014 compared with 1.3x, assuming Oracle issues $5 billion of debt to fund the pending acquisition of MICROS.

As of May 31, 2014, total debt was $24.2 billion and consisted primarily of:

--$1.5 billion of 3.75% senior notes due July 2014;

--$2 billion of 5.25% senior notes due January 2016;

--$2.5 billion of 1.20% senior notes due October 2017;

--$2.5 billion of 5.75% senior notes due April 2018;

--$500 million of floating rate senior notes due January 2019;

--$1.5 billion of 2.375% senior notes due January 2019;

--$1.75 billion of 5% senior notes due July 2019;

--$1 billion of 3.875% senior notes due July 2020;

--$1.62 billion of 2.25% senior notes due January 2021;

--$2.5 billion of 2.50% senior notes due October 2022;

--$1 billion of 3.625% senior notes due July 2023;

--$975 million of 3.125% senior notes due July 2025;

--$1.25 billion of 6.50% senior notes due April 2038;

--$1.25 billion of 6.125% senior notes due July 2039;

--$2.23 billion of 5.375% senior notes due July 2040.

Fitch affirms Oracle's ratings as follows:

--Long-term IDR at 'A+';

--Revolving credit facility at 'A+';

--Senior unsecured debt at 'A+';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Additional information is available 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837154

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
In their Live Hack” presentation at 17th Cloud Expo, Stephen Coty and Paul Fletcher, Chief Security Evangelists at Alert Logic, will provide the audience with a chance to see a live demonstration of the common tools cyber attackers use to attack cloud and traditional IT systems. This “Live Hack” uses open source attack tools that are free and available for download by anybody. Attendees will learn where to find and how to operate these tools for the purpose of testing their own IT infrastructu...
DevOps Summit, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development...
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome,” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Whether you like it or not, DevOps is on track for a remarkable alliance with security. The SEC didn’t approve the merger. And your boss hasn’t heard anything about it. Yet, this unruly triumvirate will soon dominate and deliver DevSecOps faster, cheaper, better, and on an unprecedented scale. In his session at DevOps Summit, Frank Bunger, VP of Customer Success at ScriptRock, will discuss how this cathartic moment will propel the DevOps movement from such stuff as dreams are made on to a prac...
SYS-CON Events announced today that DataClear Inc. will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. The DataClear ‘BlackBox’ is the only solution that moves your PC, browsing and data out of the United States and away from prying (and spying) eyes. Its solution automatically builds you a clean, on-demand, virus free, new virtual cloud based PC outside of the United States, and wipes it clean...
With the proliferation of connected devices underpinning new Internet of Things systems, Brandon Schulz, Director of Luxoft IoT – Retail, will be looking at the transformation of the retail customer experience in brick and mortar stores in his session at @ThingsExpo. Questions he will address include: Will beacons drop to the wayside like QR codes, or be a proximity-based profit driver? How will the customer experience change in stores of all types when everything can be instrumented and a...
Contrary to mainstream media attention, the multiple possibilities of how consumer IoT will transform our everyday lives aren’t the only angle of this headline-gaining trend. There’s a huge opportunity for “industrial IoT” and “Smart Cities” to impact the world in the same capacity – especially during critical situations. For example, a community water dam that needs to release water can leverage embedded critical communications logic to alert the appropriate individuals, on the right device, as...
Manufacturing connected IoT versions of traditional products requires more than multiple deep technology skills. It also requires a shift in mindset, to realize that connected, sensor-enabled “things” act more like services than what we usually think of as products. In his session at @ThingsExpo, David Friedman, CEO and co-founder of Ayla Networks, will discuss how when sensors start generating detailed real-world data about products and how they’re being used, smart manufacturers can use the ...
WebRTC services have already permeated corporate communications in the form of videoconferencing solutions. However, WebRTC has the potential of going beyond and catalyzing a new class of services providing more than calls with capabilities such as mass-scale real-time media broadcasting, enriched and augmented video, person-to-machine and machine-to-machine communications. In his session at @ThingsExpo, Luis Lopez, CEO of Kurento, will introduce the technologies required for implementing thes...
Organizations from small to large are increasingly adopting cloud solutions to deliver essential business services at a much lower cost. According to cyber security experts, the frequency and severity of cyber-attacks are on the rise, causing alarm to businesses and customers across a variety of industries. To defend against exploits like these, a company must adopt a comprehensive security defense strategy that is designed for their business. In 2015, organizations such as United Airlines, Sony...
SYS-CON Events announced today that HPM Networks will exhibit at the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. For 20 years, HPM Networks has been integrating technology solutions that solve complex business challenges. HPM Networks has designed solutions for both SMB and enterprise customers throughout the San Francisco Bay Area.
Any Ops team trying to support a company in today’s cloud-connected world knows that a new way of thinking is required – one just as dramatic than the shift from Ops to DevOps. The diversity of modern operations requires teams to focus their impact on breadth vs. depth. In his session at DevOps Summit, Adam Serediuk, Director of Operations at xMatters, Inc., will discuss the strategic requirements of evolving from Ops to DevOps, and why modern Operations has begun leveraging the “NoOps” approa...
While many app developers are comfortable building apps for the smartphone, there is a whole new world out there. In his session at @ThingsExpo, Narayan Sainaney, Co-founder and CTO of Mojio, will discuss how the business case for connected car apps is growing and, with open platform companies having already done the heavy lifting, there really is no barrier to entry.
To assist customers with legacy Windows Server 2003 that is no longer supported by Microsoft, Racemi has introduced fixed price packages for upgrading and migrating Windows Server 2003 servers to either Windows 2008 R2 or Windows 2012 R2 and the choice of Amazon Web Services (AWS) or SoftLayer cloud. "We're extending a lifeline by upgrading the legacy servers to more modern Windows Server platforms while taking advantage of cloud computing," said James Strayer, vice president of product managem...
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo, November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Learn what is going on, contribute to the discussions, and e...