The business software maker posted a larger-than-expected sales decline and missed analysts’ profit forecasts for its fiscal quarter ended May 31.
Oracle blamed the shortfall on the strong U.S. dollar, which has appreciated against major world currencies, effectively discounting each sale the Redwood City, Calif., company made abroad. Oracle said its total revenue fell 5% from a year ago, or rose 3% after adjusting for the stronger dollar.
Total software revenue fell 6% to $8.4 billion in its fourth quarter, when its sales typically are strongest. Investors and analysts fixated on Oracle’s weak sales of new software licenses.
In statements that were somewhat testy by the genteel standards of corporate earnings calls, Oracle Executive Chairman Larry Ellison said the company’s revenue reflected customer adoption of cloud services over traditional products that are paid upfront and installed on corporate computers. The effect of this change is to spread out software revenue over longer periods than was typical, and to depress short-term revenue.
In one of the few bright spots in the quarter, revenue rose 28% from some of the company’s cloud services, or software retooled for delivery over the Web and sold as a subscription. Still, those services accounted for just 5% of total revenue last quarter.
Co-Chief Executive Safra Catz chided analysts for concentrating on sales of traditional software licenses. “Our customers are focused on [the] cloud, as is our sales force,” she said. “And we’re pushing that conversion quickly.”
Daniel Ives, a FBR Capital Markets analyst, ranked Oracle’s financial results “a C+ performance. Many investors are shaking their heads right now wondering what is next for Oracle’s growth path.” The stronger dollar wasn’t enough to account for the disappointing performance, Mr. Ives said.
Oracle shares fell about 6.5% in late trading after gaining 27 cents to $44.91 in 4 p.m. New York Stock Exchange trading. Through Wednesday’s close, its share price this year has been roughly flat, underperforming major market indexes.
Like many old-guard tech companies, Oracle is trying to reinvent its products and sales approach to adapt to the changing ways businesses use and buy technology. Its financial struggles spotlight how tough it has been for Oracle—hugely successful in a prior era of technology—to remain relevant and maintain growth.
Overall, net income fell 24% from a year earlier to $2.76 billion, or 62 cents a share, on $10.71 billion in overall revenue. In year-ago period, net was $3.65 billion, or 80 cents a share. Excluding stock compensation and some other costs, Oracle’s adjusted earnings were 78 cents a share, short of analysts’ the 87-cents-a-share estimate.