Two CEO policy not working? Oracle disappoints again after continued drop in licensed software sales
Oracle sales have fallen more than expected as the software giant struggles to contend with falling traditional licensing revenues and a strong US dollar.
Whilst Oracle is still profitable, the company has disappointed Wall Street again with its decline in both profits and sales during its first quarter 2016.
Oracle of course is now under the management of two different CEOs. Former CEO and co-founder Larry Ellison finally ended his 37-year reign in charge of the software giant this time last year. Since that time, Oracle has been run by two CEOs – Safra Catz and Mark Hurd.
Catz is responsible for manufacturing, finance, and legal functions, whereas Hurd oversees all sales, service and vertical industry global business units. Both men are under pressure to improve the fiscal performance of the company after Oracle posted a smaller net profit of $1.75 billion (£1.1bn), down 20 percent from $2.2 billion (£1.4bn) a year earlier.
There was equally bad news on the revenue front, after sales fell 2 percent to $8.4 billion (£5.4bn) compared to $8.9 billion (£5.8bn) in the same year-ago quarter. Analysts on average had forecast sales of $8.53 billion (£5.5bn).
Oracle laid the blame for the sales decline squarely on the strength of the US dollar, and said that sales actually increased seven percent on a constant currency basis.
“The strengthening of the US dollar compared to foreign currencies had a significant impact on results in the quarter,” said the company.
The humble database has long been Oracle’s cash cow, but the company is facing intense competition and is having to contend with a shift to cloud products where margins are tighter. And cloud-based sales currently are a small part of Oracle’s total revenues. Indeed, for the first quarter Oracle said that sales of its cloud-computing software and platform service rose 34 percent to $451 million (£291m). But sales of traditional software licenses fell 16 percent to $1.51bn (£973m).
Despite this, Oracle’s management put a positive spin on the results.
“Our traditional on-premise software business plus our new cloud business grew at a combined rate of 6 percent in constant currency,” said Oracle CEO, Safra Catz. “This growth is being driven by new SaaS and PaaS annual recurring cloud subscription contracts which almost tripled in the quarter.
“In Q1 SaaS and PaaS revenue was up 38 percent in constant currency – in Q4 that revenue growth rate will be over 60 percent,” said Oracle CEO, Mark Hurd. “That cloud revenue growth rate is being driven by a year-over-year bookings growth rate of over 150 percent in Q1. Our increasing revenue growth rate is in sharp contrast to our primary cloud competitor’s revenue growth rates which are on their way down.”
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