Oracle Sees Flat Sales As Software Disappoints

Oracle has posted a healthy profit, but the market took fright at its flat revenues for the financial quarter that ended 31 May.

It comes as the software giant sees some of its business level off – and in some cases erode – in the face of less-expensive cloud-based competition.

Share Fall

In its Q4 2013 financial report, Oracle revealed a profit of $3.81 billion (£2.5bn) or 80 cents/52 pence per share. On the positive side, this was up 10 percent from the $3.45 billion (£2.2bn) or 69 cents/45 pence a share Oracle posted a year earlier.

However less positive news came from Oracle’s revenues, which rose just one-third of a percent to $10.95 billion (£7.1bn). This missed the $11.12bn (£7.2bn) analysts had expected on average, according to Thomson Reuters.

Oracle stock price paid the price for this miss and fell after the session close, slipping an alarming 8 percent to $30.59 (£19.74).

Total revenue in Oracle’s bread-and-butter software division increased 3.6 percent, but income fell more than 9 percent in its services and hardware groups each – services 9.5 percent, hardware 9.3 percent.

Ellison reportedly blamed Oracle’s performance on the poor global economic conditions.

“It was clearly an economic issue, not a product, competitive issue,” he is quoted as telling analysts on a conference call.

Yet Oracle has been struggling in the hardware business for more than three years since it acquired servers, storage and networking from Sun Microsystems in January 2010. It was Oracle hardware’s eighth consecutive quarter of revenue decline.

Increasing Competition

In good news for stockholders, Oracle doubled its quarterly dividend to a payout of 12 cents (8 pence) a share and authorised repurchase of up to an additional $12 billion (£7.7bn) of common stock.

The company also said that it has applied to transfer its shares to the New York Stock Exchange from the Nasdaq.

Web-based service companies such as Salesforce.com and a number of smaller players have cut substantially into Oracle’s traditional CRM and other software businesses. Oracle didn’t launch its own subscription-based cloud services division until June 2012, long after many others had already been established as market leaders.

And some observers are worried at Oracle’s chances of turning things around.

“We don’t see revenue growth at all.  … ORCL technology is too ancient in light of what Amazon.com is doing with AWS; Redshift; Pivotal; and VoltDB,” analyst Trip Chowdhry of Global Equities Research wrote in a media advisory.

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