Oracle Shares Drop after Poor Earnings Report

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Oracle’s third quarter earnings report failed to meet analyst expectations. As a result, the company’s share price fell sharply.

Bloomberg’s Aaron Ricadela and Dina Bass reported, “Oracle Corp. (ORCL) reported sales and profit that missed analysts’ estimates as corporate customers transitioning to Web-based programs bought less hardware and software. The shares fell the most since 2011. Fiscal third-quarter profit excluding some items was 65 cents a share on adjusted sales of $8.97 billion, the company said in a statement yesterday. That compares with analysts’ average projection for profit of 66 cents on sales of $9.37 billion, according to data compiled by Bloomberg.”

Noel Randewich from Reuters added, “Oracle Corp blamed its rapidly expanding salesforce for a severe miss in third-quarter software sales and warned that its ailing hardware business will lose more ground this quarter, driving its shares 8 percent lower on Wednesday. The world’s No. 3 software maker projected a 1 to 11 percent rise in new software licenses and Internet-based subscriptions in the May quarter – an indicator of future performance. But investors focused on a 2 percent slip in the February quarter that badly missed Wall Street’s targets.”

BBC News quoted Oracle CFO Safra Catz, who said, “What we really saw was the lack of urgency we sometimes see in the sales force, as Q3 deals fall into Q4. Since we’ve been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps as they ran out of runway in Q3.”

ZDNet’s Larry Dignan commented, “What’s notable about Oracle at this juncture is that it is facing multiple challenges. First, there’s the obvious software as a service competition from the likes of Salesforce.com and Workday. But there is also talk that Oracle has had trouble keeping subscribers from its recent cloud purchases. And then there’s the attack on Oracle’s maintenance revenue stream from Rimini Street. Toss in big data, Hadoop and NoSQL and Oracle’s database unit may also see challenges. What’s unclear is whether Oracle’s second quarter, which did well, or the third quarter, which bombed, is representative of the company’s fortunes going forward.”