By Shira Ovide
The Oracle Corp. profit machine is back in gear.
Best known for databases used by many big businesses, the
company posted quarterly results Wednesday that were a pleasant
surprise for investors who had lost confidence in the company's
ability to churn out reliable financial results.
While net income fell 2%, adjusted profits and revenue exceeded
the average of estimates from Wall Street financial analysts. That
broke a string of three straight quarters in which Oracle's
financial results fell short of analyst expectations.
Oracle's revenue of $9.6 billion, up 3.5% from a year earlier,
was a bit higher than the average of Wall Street estimates, which
as $9.51 billion. Earnings adjusted for income-tax effects and
other items were 69 cents a share, a penny higher than analyst
expectations.
"This was a nice step in the right direction for Oracle, and was
a stark contrast to the softness seen over the last few quarters,"
said Daniel Ives, an analyst with FBR Capital Markets.
Oracle rose about 4.7% in trading after the regular close of
U.S. stock markets, to $43.10. The share price through Wednesday
had climbed about 8% this year, a bit lower than the gains in the
S&P 500 stock index.
The report was an upbeat start for co-CEOs Safra Catz and Mark
Hurd, who took over the top job in September. Larry Ellison, who
built the company into one of the world's biggest tech firms,
stepped down as CEO after 37 years.
While Ms. Catz and Mr. Hurd are experienced hands at Oracle, the
question is how aggressively they will change the company. Mr.
Ellison has made it clear he will remain actively involved in his
new role as head of engineering.
Oracle's sales of cloud software--a catchall category that
includes Web-friendly versions of the company's applications for
human-resources departments and sales people--rose 45% from the
same quarter a year earlier. Three months ago, cloud software sales
rose 31%. Cloud software sales were 5.4% of total revenue, less
than the 5.5% in the prior quarter.
"The acceleration in the business bodes very well for our
future," Ms. Catz said on a conference call Wednesday with
analysts.
Cloud software is a crucial area for Oracle and its peers as
more business customers prefer to subscribe to software accessed
over the Web, rather than purchase it outright and then pay monthly
maintenance fees to keep it up-to-date.
Mr. Ellison boasted on the conference call that Oracle next year
may book more new cloud-software business than Salesforce.com Inc.,
a fierce Oracle rival and a sometime partner that has been selling
cloud software for 15 years.
"It's going to be close. We're catching up to them and we're
catching up very quickly," Mr. Ellison said.
Like other big corporate-technology companies that sell products
across the globe, Oracle stressed how the strong U.S. dollar is
weighing on the company's growth rate. Revenue rose 7% after
adjusting for the strong dollar, Oracle reported. Ms. Catz
emphasized that it is difficult to predict how foreign-exchange
rates will affect Oracle's financial results in coming months.
Write to Shira Ovide at shira.ovide@wsj.com
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