In a release closely watched for trends in tech spending, Oracle (ORCL) late Thursday posted results that beat analyst views yet worried investors.
The database leader said per-share profit minus items jumped 25% from the year-earlier quarter to 75 cents, 4 cents above the consensus forecast of analysts polled by Thomson Reuters.
But while revenue for Oracle’s fiscal fourth quarter ended May 31 rose 12%, the $10.8 billion tally barely edged the $10.75 billion that analysts expected. Revenue was dragged down by a 6% decline in hardware sales, to $1.16 billion, below the company’s guidance of $1.31 billion to $1.38 billion.
And the company’s outlook for the current quarter merely met views; several analysts had seen a good chance Oracle would raise its outlook. Oracle has often guided above views.
“Oracle’s fourth-quarter results generally look very strong, but the hardware business disappointed again, which is the reason for the weakness after hours,” said analyst Brendan Barnicle of Pacific Crest Securities.
“Oracle is still transitioning away from the legacy Sun business to the new Exadata business, which has enormous potential but is still not large enough to offset the decline in the Sun legacy business,” Barnicle said.
Oracle bought server maker and Java developer Sun Microsystems last year for more than $7 billion in a merger that gave the business software maker its first major foray into the hardware business.
It also makes Oracle a more key barometer of enterprise spending, which accounts for 60% of all tech spending in the U.S.
Oracle shares were down nearly 4% after hours. The stock hit a nearly 11-year high last month, but have since fallen 11%.
Total software revenue rose 16.6% to $7.7 billion, in line with expectations.
For the current quarter, Oracle said it expects revenue of $8.17 billion to $8.4 billion, up 9% to 12% from the year-earlier quarter. The midpoint matches analyst views of $8.28 billion.
For earnings per share, Oracle expects 45 cents to 48 cents, minus items, compared with 42 cents a year ago. The midpoint edges analyst views of 46 cents.
Analyst Neil Herman at Ticonderoga, in a research report Thursday, said tech spending in the banking and transportation sectors is slowing, which could hinder a full recovery in tech spending.
Growing Sales Force
“From the ground up, the economy is sort of as it is and yet we continue to grow,” Safra Catz, Oracle’s president and chief financial officer, told analysts on a conference call. “This quarter was an organic-growth quarter for us. We have a lot of Oracle-specific momentum, and while we read the same newspapers that you do, be sensitive to the fact that our sales force continues to grow.”
Oracle added 800 people to its sales force last quarter. While database and business software remain its main businesses, the company’s hardware offerings include its Exadata computers, which feature Oracle database products. It competes with gear made by Hewlett-Packard (HPQ) and IBM (IBM) that targets high-end enterprise data centers.
Working in Oracle’s favor, wrote analyst Richard Davis at Canaccord/Genuity in a report Tuesday, is that its rivals are lagging.
“Oracle is far from perfect, but customers we have spoken with believe it has a more complete and better integrated (product) stack than SAP (SAP), HP, IBM and Microsoft (MSFT),” he wrote.
Indeed, the company said its new software license revenue rose a solid 19% in Q4, to $3.7 billion.
CEO Larry Ellison was upbeat, saying in a statement that Oracle’s database business had its fastest growth in a decade.
“Over the past few years we added features to the Oracle database for both cloud computing and in-memory databases that led to increased database sales this past year,” Ellison said in the statement. “Lately we’ve been focused on the big business opportunity presented by Big Data,” a reference to the loads of data being created due to rapid growth in Internet networks.
(Source IBD Newsletter)