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 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 Will working with the enemy lead to sales growth? Oracle's Fiscal 4Q-Sales Disappoint Wall Street Oracle slips up twice in a row. Other Stocks in the News Has This Media Company Bitten Off More Than it Can Chew? Is Gannett's massive local TV expansion good or bad for business? Will Candy Crush Cause Cavities in Your Portfolio? Should investors be excited about King's upcoming IPO? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jun 25, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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