Oracle: We’re Cloudier Than You Think; CEO Larry Ellison and other Oracle executives sought to counter fears that the company is falling behind to competitors in cloud-based products

December 20, 2013 Leave a comment

Oracle: We’re Cloudier Than You Think

Company Touts Gains in Its Web-Delivered Software; Quarterly Revenue Rises 2%

CEO Larry Ellison and other Oracle executives sought to counter fears that the company is falling behind to competitors in cloud-based products. Reuters

SHIRA OVIDE

Updated Dec. 18, 2013 7:40 p.m. ET

Oracle Corp. ORCL +2.88% had a message Wednesday for Wall Street: We’re cloudier than you think. Investors have been antsy about missed revenue targets and competition from online rivals to Oracle, one of the world’s biggest sellers of software, computer servers and other back-end technologies for big businesses.But on Wednesday, Oracle reported second-quarter revenue rose 2%, slightly ahead of expectations, and bookings for Web-delivered software, or “cloud” products, jumped 35%.

Oracle doesn’t disclose revenue for its cloud products, but it reported solid growth in software subscriptions to human-resources department, accounting and other corporate departments.

On a conference call with analysts, Oracle executives sought to counter fears about competition from cloud-focused companies such as Salesforce.com Inc. CRM +2.18%and Workday Inc. WDAY +0.75% while taking a few swipes at rivals.

President Safra Catz said Oracle is gaining market share versus its online rivals and generating profits, “unlike all those cloud companies.” Both Salesforce and Workday reported losses in their most recent quarters.

“We decided that we were really going to lean in to the cloud to get market share,” Ms. Catz said in the conference call Wednesday.

Executives’ optimism about Oracle’s cloud offerings, combined with better-than-expected revenue guidance, was a relief to Wall Street.

Oracle shares rose more than 1% in after-hours trading following Wednesday’s financial report. During regular trading, Oracle shares climbed 2.9% to $34.60 in a rallying market.

“The stage is set for Oracle to reaccelerate growth,” said Daniel Ives, an analyst with FBR Capital Markets. “It all comes down to execution now.”

Oracle has been expanding and reorganizing its sales force in the last 18 months, and Chief Executive Larry Ellison said the investment is starting to pay off. On the conference call, he said part of the reorganization included allocating sales people to focus on competing against rivals such as Salesforce and corporate-software firm SAP AG.

Oracle said it expected revenue from new software sales and subscriptions would increase between 2% and 12% in the current quarter from a year ago, adjusted for the impact of currency fluctuations.

In the just-completed second quarter, sales of new software licenses and subscriptions inched down 0.4%.

For the second fiscal quarter ended Nov. 30, Oracle reported net income of $2.55 billion, or 56 cents a share, compared with net income of $2.58 billion, or 53 cents, a year earlier. Earnings per share rose because Oracle had 5.5% fewer shares outstanding, due to its aggressive repurchase program.

Revenue rose to $9.3 billion. The average of analyst estimates had been revenue of about $9.2 billion, according to Thomson Reuters.

Excluding stock-based compensation, restructuring and other items, Oracle’s profit of 69 cents a share topped Wall Street’s earnings estimate of 67 cents a share.

One pleasant surprise for analysts was a slowing in the decline in hardware sales, which have been a lodestone for several quarters.

Oracle said sales of server systems and other gear for running companies’ back-end computer centers dipped 2.7%. Three months earlier, the drop was 14%.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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