By Noel Randewich
SAN FRANCISCO, Sept 18 Oracle Corp
forecast sales and profit for its second quarter that fell short
of expectations as it continues to battle soft global IT demand
and smaller rivals focused on providing software over the
Shares of the third largest software maker fell in
after-hours trading on Wednesday.
Oracle predicted that sales of new software and
subscriptions - a closely watched determinant of future revenue
- would be in a range of between down 4 percent and up 6 percent
in its fiscal second quarter.
It said it expects earnings per share, on a non-GAAP basis,
of between 65 cents and 70 cents, compared with the average of
analysts' forecasts of 69 cents.
The company forecast revenue growth of between 1 and 4
percent this quarter in constant dollars, translating to revenue
of $9.02 billion to $9.29 billion and lagging the $9.41 billion
Wall Street had expected. It also gave the revenue guidance in
U.S. dollars, equivalent to a decline 1 percent or an increase
of as much as 2 percent.
The forecasts came on a conference call with executives
after the company released first-quarter numbers on Wednesday
that briefly buoyed the stock.
Oracle reported higher first quarter earnings that beat
estimates. Revenues rose 2 percent, but missed estimates.
Oracle Chief Executive Officer Larry Ellison missed the call
while his sailing team, Oracle Team USA, battled on San
Francisco Bay to hold onto the America's Cup. The New Zealand
team won Wednesday's match, leaving it just one race away from
taking the trophy.
Expectations had been muted after disappointing quarterly
reports in March and June that led to sell offs in Oracle's
shares of almost 10 percent in both of the following trading
sessions. In the past three months, the stock has partly
recovered and is now up about 1 percent year-to-date.
Smaller, aggressive companies are offering competitive
software and Internet-based products at prices that often
undercut Oracle, whose strategy is to integrate software with
its own high-end, expensive hardware for greater efficiency.
Still, many on Wall Street expect Oracle to eventually adapt
to a more competitive and cloud-focused market. Ellison and his
management team are known to excel in troubled times and Oracle
has introduced its own offerings in the rapidly growing area.
"The softer guide for November will be disappointing to
those investors that were looking for a more positive outlook
from Oracle," said FBR analyst Daniel Ives. "The company has
growth challenges ahead as they transition to the cloud and
their guidance reflects that dynamic."
Barclays released a survey on Wednesday indicating that
corporations expect flat spending on IT in the second half of
2013, down from expectations of a slight increase when the
survey was last taken in April.
The threat of a government shutdown next month in
Washington, the most recent fiscal showdown between federal
lawmakers, could potentially mute a pickup in enterprise tech
"There's a lot of news out there, whether it's coming from
our own government or Europe. That influences what we put as a
backdrop for our forecasts," Catz said.
Oracle said new software sales and Internet-based software
subscriptions rose 4 percent to $1.7 billion in its fiscal first
quarter which ended in Aug. 31, in line with its own forecasts.
Analysts on average had expected about $1.63 billion, Ives said.
The company had forecast that new software sales and
subscriptions would be unchanged or rise as much as 8 percent in
the first quarter. Investors scrutinize new software sales
because they generate high-margin, long-term maintenance
contracts and are an important indicator of future profit.
Oracle said overall revenue rose 2 percent to $8.37 billion
in the first quarter. That was a little below the $8.479 billion
analysts had expected on average, according to Thomson Reuters
Net income rose to $2.19 billion, or 47 cents per share,
from $2.03 billion, or 41 cents per share, in the year-ago
quarter. On an adjusted basis, Oracle earned 59 cents per share.
Analysts expected first-quarter adjusted earnings per share
of 56 cents, down from an average estimate of 58 cents two
Revenue from Oracle's hardware systems products, which it
acquired through the $5.6 billion purchase of Sun Microsystems
in 2010, fell 14 percent to $669 million.
Oracle had forecast that hardware product revenue for the
August quarter would decline as much as 6 percent or grow as
much as 2 percent.