Oracle Reports Decline In Profits

Oracle’s sales fell more than expected in the first quarter, hurt by a strong dollar and a continued drop in licensed software sales and the company warned revenue could fall in the current quarter even on a constant currency basis.

Like its rivals such as SAP, IBM and Microsoft, Oracle is striving to boost internet-based software sales to head off fast-growing competitors such as Salesforce.com.

But, analysts have said Oracle’s cloud software business has not been growing fast enough to make up for declines in the 38-year-old company’s licensed software business due to reasons ranging from slow customer adoption to tough competition.

Oracle’s revenue declined 1.7% to $8.45 billion in the quarter ended August 31, missing analysts estimates for the third quarter in a row.

The company said sales increased 7% on a constant currency basis. However, it forecast revenue to range between a fall of 2% to growth of 1% in the current quarter.

“On an apples-to-apples basis, that’s disappointing. It’s pretty clearly below consensus even at the top end,” c said.

Oracle’s shares fell as much as 2.8% in extended trading on Wednesday.

The company’s net income declined 20% to $1.75 billion in the first quarter. Excluding items, it earned 53 cents per share, more than analysts’ estimate of 52 cents.

Sales of Oracle’s cloud-computing software and platform service rose 34% to $451 million. Sales of traditional software licenses fell 16% to $1.51 billion.

Wall Street was expecting cloud-based sales to increase 35% and licensed software sales to decline 17%, according to RBC Capital Markets.

“In the foreseeable future the database business continues to be a dark cloud over the company’s head,” FBR Capital Markets analyst Daniel Ives said.

Cloud-based software sales account for a small portion of Oracles’ total revenue as they are subscription based, which promise a steady revenue stream but with lower margins.

Fundamentally, all of Oracle’s software will be available on the cloud by the OpenWorld conference at the end of October, co-chief executive Mark Hurd said on a call with analysts.

Ives said Oracle needs to make acquisitions to fuel growth in its cloud business and convince investors who are sceptical of a turnaround.

He named Splunk, Tableau Software, NetSuite and Workday as “game-changing” acquisitions for Oracle.