Oracle Tops Profit Estimates Amid Shift to Cloud Products

22 Dec 2015 | Author: | No comments yet »

CompaniesOracle profits dip, but cloud business grows.

Profit excluding certain items was 63 cents a share in the period that ended Nov. 30, the Redwood City, California-based company said Wednesday in a statement.

SAN FRANCISCO — Software giant Oracle Corp. got a lift from its cloud services business in the second quarter, topping analyst estimates for quarterly earnings but falling short of projections in revenue.Oracle’s latest quarterly sales and profits took a hit from a stronger US dollar, but its cloud computing business, which its counting on as an engine of growth, posted gains.Shares of Oracle (ORCL) are up 68 cents, or 1.8%, at $39.54, after the company this afternoon reported fiscal Q2 revenue in line with analysts’ expectations, and earnings per share that topped expectations, with revenue held back by the continued rise of the U.S. dollar against other world currencies.Oracle has been a victim of the higher value of U.S. currency, which hurts its income statement when revenue booked in foreign currencies is converted to dollars. Chairman and founder Larry Ellison once again took a swipe at competitor Salesforce.com (CRM), stating “We are still on-target to sell and book more than $1.5 billion of new SaaS and PaaS business this fiscal year; That is considerably more SaaS and PaaS new business than any other cloud services provider including salesforce.com.” While so-called on-premise software sales, the traditional form of delivering programs, declined by 4%, to $7 billion, sales of cloud computing software rose by 26% to $649 million, and would have been up as much as 31% if not for the dollar’s effect.

Oracle said the combination of “software as a service” and “platform as a service” were up 34% at $484 million, while so-called infrastructure in the cloud was up 7% at $165 million. Oracle has been pressured as customers transition from the traditional model of licensing software installed on corporate computer systems to products delivered over the Internet. In September, Safra Catz, Oracle’s co-chief executive, said she expected foreign-exchange rates to hurt revenue by 6% and per-share earnings by 5 cents but conceded that it could be worse. Koenig, an analyst at Wedbush Securities Inc. “A solid quarter is fine for the stock.” Oracle reported $1.68 billion in revenue from new software licenses, a decline of 18 percent from a year earlier.

The company has bolstered its offerings of its services that run in the so-called “cloud” as demand for traditional software that businesses run on their own computers has waned. Many of the biggest companies in the technology industry, such as Microsoft, are trying to deepen their exposure to the burgeoning trend of companies moving computing operations from individual workstations to centralised data centres. Update: On the conference call, Oracle projected revenue this quarter to be in a range of flat to up 3%, which is better than projections for a 0.7% decline this quarter.

While it’s a small piece of Oracle, Executive Chairman Larry Ellison has said the shift to cloud is still in the early stages for the industry — and his company can make gains with new products against rivals such as Workday Inc. and Microsoft Corp. In October, Oracle said it would begin rolling out a new service that enable users to rent computing power by the hour or month — taking direct aim at Amazon.com Inc.’s cloud-computing service that is now a multibillion-dollar business. Revenue growth for Oracle’s key cloud products is expected to accelerate to about 60 percent in the fiscal fourth quarter, an increase from 38 percent in the past quarter, and drive gross margins higher, Co-Chief Executive Officer Safra Catz said in the statement.

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