Oracle Revenue Rises 3.5 Percent on Strong Growth in Cloud

Oracle Corp reported a 3.5 percent increase in quarterly revenue on Wednesday, beating Wall Street's expectations, as sales at its closely watched cloud services business rose 45 percent.

Shares of Oracles, whose report was the first since co-founder Larry Ellison stepped down as chief executive, rose 2.5 percent to $42.20 in after-market trading.

Investors have been carefully watching how Oracle beefs up its cloud divisions, which deliver software over the Internet. Success on that front is a gauge for how well the company can fight off competition from cloud-software companies such as Salesforce.com Inc.

"Oracle has been going through a transition as it rationalizes the hardware business and moves their software business to the cloud," said Pacific Crest Securities analyst Brendan Barnicle. "This good evidence that they're making some progress there."

Total revenue rose to $9.6 billion (roughly Rs. 60,707 crores) from $9.28 billion (roughly Rs. 58,683 crores), beating analysts' expectations of $9.51 billion (roughly Rs. 60,138 crores). Revenue from cloud services totaled $516 million (roughly Rs. 3,263 crores).

The company broke a string of disappointing quarters in which revenue grew more slowly than expected.

In September, the company promoted co-presidents Safra Catz and Mark Hurd to co-chief executives.

Ellison, the co-founder, remains executive chairman and chief technology officer, and spoke extensively on a conference call with analysts Wednesday, particularly on Oracle's growth in the cloud.

"We think we will be number one in the cloud and will be number one in cloud very quickly," Ellison said, interjecting after Hurd briefly answered an analyst's question about cloud revenue.

In 2008, Ellison called cloud computing "complete gibberish," but in recent years, the company has tried to catch up by making a string of acquisitions.

Hurd cited several new customers for Oracle's cloud business, including Siemens, Honeywell International Inc, and Johnson & Johnson.

Nevertheless, "the company has some "wood to chop" in 2015 to accelerate top-line growth as its bread and butter database business remains under pressure," said Daniel Ives, an analyst at FBR Capital Markets.

Oracle's net income slipped to $2.50 billion (roughly Rs. 15,800 crores) in its fiscal second quarter, ended Nov. 30, from $2.55 billion (roughly Rs. 16,125 crores) a year earlier. On that basis, it earned 56 cents a share, the same as in the year-earlier quarter. Before one-times items, it earned 69 cents per share, also the same as a year ago.

Oracle built its name by selling on-premises hardware and software. New software license updates and supports remain by far the company's biggest business, with revenue of $4.77 billion (roughly Rs. 30,163 crores) last quarter, followed by new software licenses and hardware systems.

© Thomson Reuters 2014