Oracle Forecast Spooks Investors -- WSJ
March 20 2018 - 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 (March 20, 2018).
Oracle Corp. shares sank 6.5% in late trading Monday after the
company disappointed Wall Street with its guidance for
cloud-computing revenue in the current quarter -- the
third-consecutive period it has done so.
The business-software maker Monday said cloud-computing revenue
would climb 19% to 23% in the fiscal fourth quarter. Analysts had
expected 23% growth.
Oracle also alarmed investors with its cloud revenue for the
fiscal third quarter, which rose 32% to $1.57 billion.
Those results met the muted expectations Oracle set three months
ago, but investors thought the number might be even higher, given
the healthy levels of tech spending rivals such as Microsoft Corp.
and Salesforce.com Inc. recently said they had seen from
customers.
"It's definitely somewhat disappointing that they didn't show
upside, given the healthy spending environment," said Brad Reback,
an analyst at Stifel Nicolaus & Co.
Meanwhile, the company swung to a quarterly loss as it booked a
$6.9 billion charge related to the U.S. tax overhaul.
Cloud computing is key for Oracle, which is transitioning from a
leading vendor of database software companies run in their own
servers to one that also sells services that customers run in data
centers operated by Oracle and others.
The business-software giant Monday reported total cloud sales
grew 32% in the quarter, roughly what the company said it would be
three months ago.
Oracle executives remain bullish, in part because a new database
product should help buttress its performance across product
lines.
"The fact is that we are taking market share, and with
autonomous database just beginning to show up on our pipeline, this
will only strengthen our technology ecosystem growth," Chief
Executive Mark Hurd said in a conference call with analysts.
In its fiscal first and second quarters, Oracle delivered
guidance for its cloud-computing business that was below what Wall
Street had expected. While the stock fell each time, it recovered
and managed to close at a high of $52.97 earlier this month
Shares finished Monday at $51.95. In after-hours trading, they
dropped 6.5% to $48.55.
Oracle reported a net loss of $4.02 billion, or 98 cents a
share. The Redwood City, Calif., company said adjusted earnings,
which exclude stock-based compensation and other items, were 83
cents a share.
Revenue rose 6% to $9.77 billion, while adjusted revenue climbed
5% to $9.78 billion.
According to estimates gathered by S&P Global Market
Intelligence, analysts had expected Oracle to earn 72 cents a share
on an adjusted basis, on adjusted revenue of $9.78 billion.
Oracle's software-as-a-service business, in which it sells
access to web-based applications that compete against offerings
from Salesforce and Workday Inc., grew 33% to $1.15 billion.
Its platform-as-a-service business -- app-management and
data-analytics tools -- combined with infrastructure-as-a-service
-- computing resources and storage on demand -- climbed 28% to $415
million. It competes in those markets against Amazon.com Inc. and
Microsoft Corp.
While growth in Oracle's overall cloud business has decelerated,
it still grew faster than the declines in its legacy software
business. The cloud business grew $377 million year-over-year while
Oracle's new software-license revenue fell $26 million.
Overall, revenue from new software licenses fell 2%, or 6% on a
currency-adjusted basis, to $1.39 billion.
As important as shifting sales to the cloud is for Oracle, the
roughly half of its revenue comes from software-license updates and
product support. In the third quarter, that business grew 6% to
$5.03 billion.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
March 20, 2018 02:47 ET (06:47 GMT)
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