Oracle's Disappointing Fourth Quarter Results Deepen Cloud Concerns

Oracle Corp on Thursday posted fiscal fourth-quarter results that disappointed investors looking for more progress against rivals selling web-based services, sending its shares lower.

Reflecting expectations of a pickup in its software business and progress in cloud computing, shares of Oracle had gained 10 percent over the past three months, double the S&P 500's increase.

But Thursday's results cast doubt onto Oracle's execution in an industry facing increasingly tight competition.

"It's a bit of a jaw-dropper, in terms of Oracle missing results across the board in its historically strong fiscal year-end quarter," said FBR analyst Dan Ives. "It's like Spain getting knocked out of the World Cup in its first week."

Smaller, aggressive companies like Salesforce.com Inc and Workday Inc have been offering competitive software and Internet-based products at prices that often undercut Oracle.

Oracle's meager quarterly results underscore soft spending across the enterprise technology industry. Spending could become even more restrained as companies around the world move away from operating their own IT departments in favor of cloud services that cost less, said Summit Research analyst Richard Williams.

"As it moves to the cloud, overall tech spending becomes worse than a zero-sum game," Williams said. "There's going to be a lot of pain."

Four-decade-old Oracle has been rolling out its own cloud-based products but they remain under 5 percent of its overall revenue.

A string of acquisitions fueling Oracle's growth has slowed of late although the company is in talks to buy software maker Micros Systems Inc, according to a Bloomberg report this week.

"One thing that's clear is they need to get this M&A engine started again," Ives said.

For the fiscal first quarter, Oracle expects software and cloud revenue to grow between 6 percent and 8 percent, Chief Financial Officer Safra Catz told analysts on a conference call. That forecast includes expectations for software- and platform-related cloud services to grow between 25 percent and 35 percent.

Oracle said it expects its hardware system revenue to be in a range of down 1 percent to up 3 percent.

For its latest fourth quarter, Oracle said overall revenue rose 3 percent to $11.3 billion. That was less than the $11.48 billion analysts had expected on average, according to Thomson Reuters I/B/E/S.

Net income fell 4 percent to $3.6 billion. Earnings per share were unchanged at 80 cents.

On an adjusted basis, Oracle earned 92 cents per share, less than the 95 cents expected on average by analysts.

Revenue from Oracle's hardware systems products grew 2 percent to $870 million.

Shares of Oracle fell more than 5 percent in extended trade after closing down 0.70 percent at $42.51 on the New York Stock Exchange.

© Thomson Reuters 2014