Oracle Sales Miss Estimates as Hardware Sales Decline

Oracle Revenue Falls Short of Estimates as Hardware Sales Drop
Oracle Corp. -- the second-largest maker of business applications used to manage companies’ sales, finances and human resources -- has been acquiring online software companies to challenge market leader SAP AG and Inc. Photographer: David Paul Morris/Bloomberg

Oracle Corp. reported fiscal first-quarter revenue that missed analysts’ estimates as sales of computer hardware fell for a sixth straight period, curbing growth as it navigates a shift to cloud-computing services.

Sales for the quarter that ended Aug. 31 declined 2.3 percent to $8.18 billion, the Redwood City, California-based software maker said yesterday in a statement. That missed $8.42 billion, the average of estimates compiled by Bloomberg. Profit excluding some items was 53 cents a share, matching projections.

Oracle’s recent acquisitions of companies that sell customer service and human resources software delivered via the an Internet boosted applications sales during the seasonally slow first quarter. That wasn’t enough to outweigh slumping revenue for computer hardware that Oracle gained in the 2010 purchase of Sun Microsystems Inc.

“Hardware’s going to continue to be a struggle for them,” said Pat Walravens, an analyst at JMP Securities LLC. “Sun was a big company, and it’s going down.”

Sales in the current quarter will be unchanged or show an increase of as much as 4 percent, co-President Safra Catz said on a conference call. Profit excluding some items will be 59 cents to 63 cents a share, she said. On average, analysts had projected fiscal second-quarter sales growth of 5 percent and profit of 61 cents.

Hardware Systems

Oracle climbed 1.6 percent to $32.78 at 9:55 a.m. in New York. The stock has gained 26 percent this year through yesterday.

First-quarter net income rose 11 percent to $2.03 billion, or 41 cents a share, from $1.84 billion, or 36 cents, a year earlier. Oracle, the largest maker of database software, said hardware-systems products revenue declined 24 percent to $779 million. That was a steeper drop than the 14 percent estimated by Brent Thill, an analyst at UBS in San Francisco.

“Their hardware growth plan this year looks to be derailed,” Thill said in an e-mail.

The company is pushing sales of its high-end Exadata and Exalytics machines, which use Intel Corp. chips. Sales of high-end engineered systems more than doubled, co-President Mark Hurd said in the statement. Sales of servers using Sun’s Sparc chip are sagging, though.

Oracle is also the second-largest maker of applications used to manage companies’ sales, finances and human resources, and has been acquiring online software companies to challenge market leader SAP AG, as well as Inc.

License Revenue

Oracle changed the way it reports new software license revenue last quarter. Instead of breaking out sales of databases, application-connecting middleware and applications, it now reports a single new license and cloud-computing subscriptions number.

New license sales, closely watched by Wall Street because they indicate future support revenue, rose 5.1 percent to $1.6 billion.

Oracle agreed in February to acquire Taleo Corp. for about $1.9 billion. Last October, Oracle said it would purchase RightNow Technologies Inc. for $1.5 billion. Oracle acquired Sun for $7.4 billion in 2010.

Chief Executive Officer Larry Ellison, Hurd and Catz will outline Oracle’s product road maps at the company’s OpenWorld conference, which runs Sept. 30 to Oct. 4 in San Francisco.

On the call yesterday, Ellison said he’ll use his Sept. 30 address at the conference to unveil a new version of Oracle’s market-leading database software, called 12c. The new database will include technology for companies hosting cloud-computing software, Ellison said.

Wooing Developers

Customers use Oracle’s database -- which competes with software from International Business Machines Corp. and Microsoft Corp. -- to store reams of information on everything from banking transactions and airline flights to business data slated for analysis. Oracle is making more of its technology available through an Internet service called Oracle Cloud, aiming to woo developers who want to build applications delivered to users through the Web, Ellison said.

Oracle 12c will be available by February, Ellison said. In the company’s statement, the CEO said he also plans to discuss “lots of enhancements to the Oracle Cloud” service at OpenWorld, including more sales, manufacturing planning and human resources applications delivered as online services.


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