Oracle (ORCL) Fumbles on Foul Fourth Quarter Earnings
Shares of tech giant Oracle (ORCL) plunged last week, after the company missed Wall Street expectations for software sales and subscriptions for the second consecutive quarter. Oracle now forecast that new software sales and subscriptions, which account for the largest part of its top line, will only rise 0% to 8% during the current quarter. It blamed weak sales in Asia and Latin America, as well as increased competition from industry rival Salesforce.com CRM.
During its quarterly earnings announcement, Oracle also made the surprising announcement to move it stock listing from the Nasdaq to the New York Stock Exchange. It also doubled its quarterly dividend to $0.12 per share. Daily Chart
For the fourth quarter, Oracle reported flat revenue growth at $10.9 billion, missing the Thomson Reuters' projection of $11.12 billion. Sales of new software sales and Internet-based software subscriptions, also known as "the cloud," rose an anemic 1% to $4 billion, missing the average analyst forecast of $4.2 billion. Last quarter, Oracle cast a wide net with its forecast of 1% to 11% growth in new software license and cloud subscription revenue. It turns out that it barely reached the low-end of that wide projection. Oracle's net profit rose 10% year-on-year to $3.8 billion, or $0.80 per share. On an adjusted basis, earnings came in at $0.87 per share. Revenue from the company's long-suffering hardware division, which it inherited from its $5.6 billion acquisition of Sun Microsystems in 2010, slumped 13% to $849 million. The company originally anticipated a 12% to 22% decline in hardware sales, so the numbers weren't as bad as feared. However, the division has lost revenue every quarter since that massive, polarizing acquisition. Fort Pitt Capital Group analyst Kim Forrest noted that the earnings were "just really bad," and indicated how "frustrated shareholders are right now." Bernstein analyst Mark Moerdler noted that Oracle was "late to the cloud and playing catch up," and being dragged down by an ailing hardware division has been damaging to its top line growth. Yet Oracle still has its fair share of bullish analysts, despite two bleak quarters. The bulls believe that Oracle's growth will pick up again as the global economy improves, governments start spending more on IT, and corporate consumers start upgrading their existing systems. Looking ahead, Oracle faces some steep challenges from smaller, hungrier competitors that are selling their similar products and services at paper-thin margins to steal market share from the tech giant. Many of these competitors only offer software and service solutions, while Oracle is attempting to merge its hardware and software businesses onto a single platform. This has led to a decline in margins at the 36-year old company. To expand, Oracle has had to grow a massive global salesforce, which CEO Safra Catz blamed for a severe miss in software sales last quarter. Other News About ORCL Oracle and Salesforce: a Data-Sharing Deal
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Published on Jun 25, 2013
By Leo Sun