Oracle Profit Drops; Forecast Is Downbeat
Declining sales at Oracle Corp. led to a 33% drop in the database maker’s fiscal first-quarter income, and Chief Executive Larry Ellison said earnings per share for the full fiscal year could stagnate or dip slightly from the year before.
Profit fell to $343 million, or 6 cents a share, in the three months ended Aug. 31 from $511 million, or 9 cents, a year earlier, Oracle said Tuesday. Excluding an investment write-down, the Redwood City, Calif.-based company matched the consensus estimate by Wall Street firms of 7 cents a share.
Sales fell more than 10% to $2.03 billion, dragged down by new product licenses, which fell 23%. Less expensive updates to previously installed products grew 9%.
“Our assumption for the second half of the year is that again we’ll see improvement, but we certainly don’t expect any sharp improvement,” Oracle Chief Financial Officer Jeff Henley said.
Investors had been hoping for more new license sales and more optimism about the coming months, analysts said. Oracle shares fell to $8.60 in after-hours trading after the earnings report. It had dropped 25 cents to $9.03 in regular Nasdaq trading.
“License revenues were a little lower than what a lot of people had modeled, but they did meet the overall targets,” said analyst Cameron Steele of RBC Capital Markets, who owns Oracle shares and recommends them. RBC does no investment banking business with Oracle.
Revenue at the No. 2 free-standing software maker has been sliding for a year and a half. IBM Corp. and Microsoft Corp. have been making progress in parts of the database market that Oracle had dominated for years, and users haven’t flocked to other Oracle applications.
“What investors have wanted with Oracle is, first of all, growth, which they don’t have in this environment, but secondly forecasts and earnings that are at least predictable. Now we have that,” Steele said. Still, “there’s a little controversy on which direction the company is going.”
Oracle executives said they eliminated 500 to 600 jobs in the most recent quarter and would trim about that number in the next three months. Many of the cuts will come in Europe, which performed worse in the first quarter than the company had anticipated.
