News Column

Oracle's profit slumps in fourth quarter, stock takes a hit

June 19, 2014

By Steve Johnson, San Jose Mercury News



June 19--REDWOOD CITY -- Technology giant Oracle on Thursday said profit dropped in its fiscal fourth quarter and sales and earnings missed Wall Street expectations.

The company's sales for the period totaled $11.3 billion, up 3 percent from the same period a year ago. But profit fell 4 percent to $3.6 billion. That worked out to fully reported earnings of 80 cents a share, or 92 cents a share with certain expenses excluded.

Analysts surveyed by Thomson Reuters generally had expected fully reported earnings of 83 cents a share on sales of $11.48 billion, or 95 cents a share excluding certain expenses.

"Oracle delivered a disappointing quarter across the board," said FBR Capital Markets analyst Daniel Ives. "We would compare these results to Spain being knocked out of the World Cup in the first week, as investors will be very surprised by Oracle not posting a stronger quarter in its historically good fiscal year-end."

But Oracle officials noted that the Redwood City company is making progress selling so-called cloud, or Internet-based, products, even though that revenue often doesn't show up in earnings reports for several years because of the way software subscriptions are done. And President Mark Hurd insisted Oracle's cloud-product offerings are superior to those of its competitors.

"We're the only company that has a whole suite of cloud applications," he said. "We're executing, we're winning and we're going to be No. 1."

Before Oracle reported its earnings, its shares dropped 30 cents -- or less than 1 percent -- to $42.51 at the market's official close. After the report, its stock price slumped more than 5 percent in after-hours trading.

Oracle has long been among the world's biggest sellers of business-oriented database programs and other software. But to keep its sales growing, it has been moving rapidly into providing cloud services. To strengthen its grasp on that intensely competitive market, Oracle has been buying cloud providers and recently announced cloud-service partnerships with its former rivals, Microsoft and Salesforce.com.

In addition, various media outlets have reported that Oracle is close to buying Micros Systems of Columbia, Maryland, for more than $5 billion. Although Oracle has declined to comment, it reportedly had considered acquiring Micros -- which makes software for hotels, restaurants and retailers -- six years ago.

If Oracle buys Micros, "this would be the largest deal that Oracle has done" since it bought Sun Microsystems in 2010 for $7.4 billion, according to a note Wells Fargo Securities analysts sent their clients.

They added that a Micros acquisition makes sense because the hospitality market is big and the reported price would provide Oracle with "solid high-single-digit revenue growth."

So far, Oracle's foray into the cloud hasn't thrilled some analysts.

"Delivery on that potential has been tough to find in Oracle's financial results, although bookings did pick up last quarter," Raymond James analysts noted recently. "The company's still-modest organic cloud revenue growth continues to make Oracle's cloud go-to-market a 'show-me' story."

But overall, Cantor Fitzgerald analysts are pleased with the company.

"Oracle's profit growth track record is impressive," they recently reported, noting that the company "is expanding its reach within the IT world," by its push into the cloud, database software and computer server and storage equipment it acquired from Sun Microsystems.

Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.

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(c)2014 San Jose Mercury News (San Jose, Calif.)

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Source: San Jose Mercury News (CA)


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