Oracle Shares Fall on Darker Cloud Forecast -- WSJ
December 15 2017 - 03:02AM
Dow Jones News
By Jay Greene
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 15, 2017).
Oracle Corp.'s stock sank after hours following news that the
growth of its cloud-computing business in the current quarter would
fall below expectations.
Fiscal third-quarter cloud revenue would grow 21% to 25%, not
accounting for currency fluctuations, the company said after
reporting earnings Thursday. Analysts had expected growth would be
closer to 30%.
It is the second consecutive quarter Oracle gave a
lower-than-expected guidance for its cloud business. Three months
ago, the company said cloud sales would rise 39% to 43%. It
actually surpassed those diminished expectations, growing 44% in
the quarter to $1.52 billion.
Shares of the Redwood City, Calif., business-software maker
closed up a hair at $50.19 in regular trading. They initially
dropped 3.9% later when the results were released. When investors
heard the latest guidance, the share decline grew to nearly 7%.
Separately, Oracle's board also authorized a share buyback
program of $12 billion.
The 40-year-old company became the leading vendor of database
technology by selling licenses to software corporate customers run
in their own data centers. As business computing shifts to
subscriptions of online software, Oracle has pivoted. Despite
recently lowering its expectations, the company's cloud revenue has
grown rapidly.
Oracle's cloud software-as-a-service business, in which it sells
access to web-based applications, grew 55% to $1.1 billion in the
second quarter.
Its cloud platform-as-a-service business, in which it sells
access to app-management and data-analytics tools, combined with
its infrastructure-as-a-service business, where it provides
computing resources and storage on demand, climbed 21% to $396
million.
That's the business in which it competes against Amazon.com
Inc.'s Amazon Web Services and Microsoft Corp.'s Azure service.
Both companies have significantly larger cloud-infrastructure
operations and are growing those businesses at a faster pace than
Oracle.
Because Oracle came to the cloud later than those rivals, it has
focused on a market niche: existing customers shifting away from
their own data centers, said Stifel Nicolaus & Co. analyst Brad
Reback.
"That business is unlikely to have a growth rate like AWS or
Azure," Mr. Reback said.
Growth in Oracle's overall cloud business continues to outpace
declines in its legacy software business. The cloud business grew
$466 million year-over-year while Oracle's new software-license
revenue grew $6 million.
"Bottom line, our transition to the cloud is going well," Oracle
co-Chief Executive Safra Catz said during a conference call with
analysts.
Overall, revenue from new software licenses grew 0.5% to $1.35
billion.
Even as Oracle shifts to the cloud, the majority of its sales
come from software-license updates and product support. That
segment generated $4.95 billion in revenue, a 3.7% jump from a year
earlier.
Overall, net income rose 9.9% to $2.23 billion, or 52 cents a
share. The company said adjusted per-share earnings, which exclude
stock-based compensation and other items, were 70 cents.
Revenue rose 6.5% to $9.62 billion, while adjusted revenue
climbed 6.2% to $9.07 billion.
According to estimates gathered by S&P Global Market
Intelligence, analysts expected Oracle to earn 68 cents a share on
an adjusted basis, on adjusted revenue of $9.57 billion.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
December 15, 2017 02:47 ET (07:47 GMT)
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