Brian White Comments: Oracle reports slight drop in quarterly profit, but a bump in sales

December 18, 2014, San Jose Mercury News – Online

Technology giant Oracle reported second-quarter fiscal earnings Wednesday that slightly beat Wall Street’s expectations but said its profit slumped from the same period a year ago.

The corporation said its profit of $2.5 billion was down 2 percent from the second quarter last year, but its sales rose 3 percent to $9.6 billion. That worked out to earnings of 56 cents per share including all expenses, or 69 cents per share excluding some costs.

Analysts surveyed by Thomson Reuters generally had expected 56 cents per share on sales of $9.5 billion or 68 cents per share without some costs.

"Clearly we are very pleased with our results," Oracle CEO Safra Catz said during a conference call with analysts, noting that demand for the Redwood City company’s Internet-based or so-called cloud services is booming. Sales of those services totaled $516 million, up 45 percent from a year ago.

The quarterly report was the first issued by Catz and her co-CEO, Mark Hurd, after longtime chief executive and driving force, Larry Ellison, relinquished that title in September. The 70-year-old Ellison, who had overseen Oracle for 37 years, remains active in the company as executive chairman and chief technology officer.

"The jury is still out on how the new co-CEO structure at Oracle will play out now with Larry not in the CEO seat, although this was a solid start for Safra and Mark," said FBR Capital Markets analyst Daniel Ives. But despite the company’s increase in cloud sales, he added, its "bread and butter database business remains under pressure."

Before Oracle announced its earnings, its shares rose 53 cents — or more than 1 percent — to $41.16 at the market’s official close. Following the announcement, the stock price increased by more than 4 percent in early after-hours trading.

The corporation long has been among the world’s biggest sellers of business-oriented database programs and other software. It also has a computer server and storage equipment business, a niche it got into by buying Sun Microsystems in 2010. But to supplement those wwwucts, Oracle has been moving rapidly to provide its corporate customers a slew of cloud services.

To strengthen its grasp on the intensely competitive cloud market, Oracle has been busy buying a number of smaller cloud providers and has forged cloud-service partnerships with its former rivals, Microsoft and Salesforce.com.

In a recent note to his clients, Cantor Fitzgerald analyst Brian White said he is "encouraged by Oracle’s progress in the cloud." Yet he added, "Oracle has delivered choppy results over the past several quarters," in part because overall spending on information technology wwwucts "has been muted."

In a separate report, Jefferies analysts hailed Oracle as "one of the most successful acquirers of software companies over the last decade," noting that the corporation has spent about $57.8 billion on 43 acquisitions since Jan. 1, 2004. The analysts said, however, that Oracle’s sales operation, which has been undergoing a reorganization, "appears to be taking longer than expected to yield positive results."