Looking at Oracle's financial indicators we can see the TTM (trailing twelve months) to get an idea of what is going on.
Total Revenue: 39,766,000, Gross Profit: 31,734,000
This is healthy and inline with previous years. Total operating expenses are 17,481,000 which is above 2017 and 2018. It is about a billion more than it was in 2016.
17,481,000 now, 16,464,000 in 2016
Simple math says you need to cut expenses by about a billion dollars to stay healthy. Trim the fat, too much expense. Biggest expenses is R&D and Sales and admin, really only two buckets. About 600 million in Sales and admin needs to go as well as about 400 million in R&D.
Oracle needs to trim those groups by that amount.
Here is the rub. Severance packages cost money. Upfront cash money. You save money in the long run with the severance packages. As of 2019 Oracle has had a problem Cash & Short Term Investments Growth was down -43.76%. The stock buy backs have cost a great deal.
Normally I'd say that these bonds are to buy back more stock. But during this time, especially because of coronavirus this will not be seen as a good thing to do.
My belief is that the bonds are to raise money for another restructuring program as was done in 2016. The last 10Q intimated that this may happen:
During fiscal 2019, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisitions and certain other operational activities (2019 restructuring Plan). In the third quarter of fiscal 2020 and fourth quarter of fiscal 2019, our management supplemented the 2019 restructuring Plan to reflect additional actions that we expect to take. The total estimated restructuring costs associated with the 2019 restructuring Plan are up to $781 million and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred. We recorded $186 million of restructuring expenses in connection with the 2019 restructuring Plan in the first nine months of fiscal 2020 and we expect to incur the majority of the estimated remaining $119 million through the end of fiscal 2020. Any changes to the estimates or timing of executing the 2019 restructuring Plan will be reflected in our future results of operations.
restructuring costs recorded for individual line items primarily related to employee severance costs
Oracle is possibly using the bonds to attempt to buy back stock but that may not happen. Instead my thinking is they may more likely use it for severance packages. Now is a good time
From the Rueters Article below. I believe now is a good time to use the Coronavirus and related economic down turn to shed employees ahead of any drop in revenue or sales.
Corporations buy back their own shares as a way to invest in themselves. By reducing the number of outstanding shares, a company can boost its stock price, and it is one way corporations add value for shareholders.
Earlier this week, Trump said he did not like share buybacks, when asked by reporters if they would be permitted by a stimulus package being hashed out in Congress to help the American economy recover from the coronavirus.
The Republican president doubled down on his comments on Friday, when asked by a reporter during a news conference if the buybacks like those by Boeing and some airlines were a “deal breaker” for him.
“I never liked stock buybacks from their standpoint. When we did a big tax cut, and when they took the money and did buybacks, that’s not building a hangar, that’s not buying aircraft, that is not doing the kind of things that I want them to do,” he said.
Trump’s views on potential buyback restrictions matter because he would need to sign any stimulus package approved by Congress.
Boeing did not immediately respond to a request for comment.
The Tax Cuts and Jobs Act passed by Republican lawmakers in December 2017 - the biggest overhaul of the U.S. tax code in more than 30 years - slashed the corporate income tax rate and charged multinationals a onetime tax on profits held overseas.
The move prompted major U.S. corporations to bring home cash from abroad and ratchet up share buybacks. However, there was little evidence of companies reinvesting much of that money to expand, one of the goals of the overhaul.
Trump said on Friday that restrictions were not placed on companies at the time because “we thought they would have known better but they didn’t know better.”
https://finance.yahoo.com/quote/ORCL/financials/
https://www.wsj.com/market-data/quotes/ORCL/financials/annual/balance-sheet
https://www.reuters.com/article/us-health-coronavirus-trump-buybacks/trump-slams-companies-for-using-u-s-tax-credit-to-buy-back-stocks-idUSKBN2173HY
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001341439/655ddae6-3b81-45ed-a3d3-98d4bbd50220.pdf