Oracle Corp slumped in late trading after forecasting slowing sales growth in cloud-related products, fueling concerns that the company is struggling in efforts to shift away from traditional software and become a powerhouse in programs delivered over the Internet.
Sales of cloud products are expected to rise between 19 percent and 23 percent this quarter, compared with 32 percent in the period that ended Feb. 28, Oracle said on Monday.
Adding to concerns, demand for new software licenses in the recent quarter declined 1.8 percent to US$1.39 billion from a year earlier. The stock fell as much as 7.3 percent in extended trading.
Under Mark Hurd and Safra Catz, who share the chief executive officer title, Oracle has bet its future on a new version of its database software that automates more functions and a growing suite of cloud-based applications. Last quarter’s results were a reminder that the company still faces stiff competition from cloud vendors including Amazon.com Inc, Microsoft Corp and Salesforce.com Inc.
“They missed the cloud number, which is the key to this transition story,” JMP Securities LLC analyst Pat Walravens said. “Investors were expecting strength in new licenses and that decreased. This is a quarter when Salesforce and Adobe told you that IT spending was strong, but Oracle hasn’t benefited from that.”
The company’s strategy of letting customers choose to house software on their own servers or with Oracle, as a bridge to the cloud, also lost traction in the quarter, exacerbating worries about the company’s pivot to Internet-based products. To bolster its cloud business, Oracle has invested in new data centers to support existing client workloads and it has made acquisitions, such as last month’s purchase of security start-up Zenedge LLC.
Total fiscal third-quarter revenue rose 6.1 percent to US$9.77 billion, in line with what analysts had estimated. Profit, excluding some items, was US$0.83 a share, US$0.11 higher than predicted, data compiled by Bloomberg showed.
Oracle projected profit, excluding some costs, of US$0.92 to US$0.95 a share in the current quarter, compared with analysts’ estimates of US$0.90. Revenue should grow 1 to 3 percent, it said.
Oracle’s shares fell to a low of US$48.15 in extended trading after closing at US$51.95 in New York. The stock has gained 14 percent in the past 12 months.
While Oracle’s cloud unit has grown in recent quarters, its sales made up just 16 percent of the company’s total quarterly revenue. The older software-license business still dominates with US$6.42 billion in sales, or two-thirds of revenue. Revenue from software updates and product support to existing customers grew 5.6 percent to US$5.03 billion.
Oracle maintained its shareholder dividend of US$0.19 a share. The company took a one-time charge of US$6.9 billion because of changes to the US tax code approved in December last year.
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