Oracle Results Hit by Technology Shifts, Stronger Dollar

18 Jun 2015 | Author: | No comments yet »

Oracle Drops 7%: FYQ4 Rev, EPS Miss; FYQ1 EPS View Light.

With Oracle (ORCL) shares down tonight after a top-line miss in its fiscal Q4 report this afternoon, Citigroup‘s Walter Pritchard is one of the first Street observers to try and figure out what he refers to as “a significant Q4 license shortfall” despite better-than-expected cloud computing software bookings.REDWOOD CITY, Calif. (AP) — Shares of Oracle are slumping aftermarket trading after the software maker’s fourth-quarter results fell short of Wall Street estimates.Database and applications giant Oracle (ORCL) this afternoon reported fiscal Q4 revenue and earnings that missed analysts’ expectations, noting the impact of the rising U.S. dollar. Oracle’s income statement includes “new software licenses” of $3.138 billion, within the broader category of “total software and cloud revenues,” and that $3.14 billion figure is an 8% miss, relative to Pritchard’s expectation for $3.43 billion, and what he deems to have been consensus going into the report of $3.41 billion. “An 8% license revenue miss is the largest we’ve seen in memory and is surprising,” writes Pritchard, “even if mostly made up by stronger cloud bookings.” It’s also puzzling, he writes, given what were easy “comps” for the year-earlier period.

Oracle said its revenue from cloud computing rose 29%, year over year, to $416 million, counting just things listed as “software as a service,” or “SaaS, and “platform as a service, ” or PaaS. Revenue fell 5.4 percent to $10.7 billion in the period ended May 31, and profit before certain costs was 78 cents a share, the Redwood City, California-based company said in a statement. Writes Pritchard, “With significant license miss and opacity into transition to cloud as well as overall organic growth, we don’t expect Oracle will get the benefit of the

All of Oracle’s management — executive chairman and CTO Larry Ellison, and co-CEOs Safra Catz and Mark Hurd — trumpeted the growth of cloud software. Said Ellison, Oracle will “book between $1.5 and $2.0 billion of new SaaS and PaaS business,” in the new fiscal year. “That means Oracle would sell more new SaaS and PaaS business than plans to sell in their current fiscal year — the only remaining question is how much more.” Catz called the $426 million of SaaS and PaaS cloud subscriptions “astonishing,” referring not to the actual Q4 revenue number, but to new bookings of software.

Like other multinational software companies, Oracle has been hurt by foreign-exchange volatility, with a stronger dollar eroding the value of income earned abroad. Without this, revenue would have climbed 3 percent in constant currency, Oracle said, bolstering its argument that its push into cloud services is offsetting any slowdown in its traditional businesses. “They’ve been guiding too aggressively and pretty consistently for eight quarters or so,” said Steven R. That revenue range is above consensus for $8.62 billion, however, Catz, presenting that outlook, noted that the company was this time providing a non-GAAP revenue outlook, instead of the customary GAAP number. The company has lagged behind Inc., Workday Inc and other cloud-computing competitors, while racing to beat established rivals such as SAP AG and International Business Machines Corp.

While getting customers to pay monthly for computing services can deliver stable sales down the road, companies that have made the transition — such as Adobe Inc. — have seen their immediate income slump due to lower one-time sales of software products. Ellison is now the company’s chief technology officer and chairman. “Even though new licenses are down, the updates and support are really strong, plus the cloud is good,” said Kevin Walkush, co-portfolio manager at Jensen Investment Management, which owns around 6,500,000 shares in Oracle. “They’re still generating dramatic amounts of maintenance revenue and they can use that to fund their cloud.”

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