Oracle has posted fourth-quarter results that failed to meet analyst expectations, and revealed that cloud is worth four percent of the firm's current revenues.
The enterprise IT giant posted revenues of $11.32bn for its fiscal 2014 fourth quarter, which covers March to May 2014. This was up three percent compared with $10.95bn the same quarter a year ago. However, the firm saw a four percent drop in profits, from $3.81bn in Q4 2013 down to $3.65bn this quarter.
Oracle did not see any sudden spikes across its cloud portfolio, which currently only accounts for four percent of its sales, an area the firm will need to build as businesses turn increasingly to the cloud and away from traditional software.
For all cloud areas, covering software, platform and infrastructure as a service, Oracle posted $80m more revenue compared with the same period in 2013. This compares with flat sales for new software licences, which account for a quarter of the firm’s business, with Oracle’s biggest software growth coming from its licencing and maintenance of existing deployments.
The concern for the firm, and likely investors, will be that this is an area that will decline as SaaS versions become the norm, but it is still worth almost 50 percent of the firm’s revenues.
Chief executive Larry Ellison was upbeat about the firm’s prospects in the cloud, despite its slow origins, citing the firm’s “complete and modern” SaaS in the cloud portfolio, and the fact these apps run on Oracle’s In-Memory platform and Java programming language.
“Oracle is focused like a laser on one goal over the next few years: becoming the number one company in cloud computing’s two most profitable segments, software as a service (SaaS) and platform as a service (PaaS),” he said on a conference call.
Ellison also noted that as Oracle transitions to a cloud business, it will report lower revenue in the short term, but much higher revenues in the long term due to ongoing SaaS subscriptions.
According to Oracle's chief financial officer Safra Catz, there was a lot of cloud revenue booked that has not been recognised in the firm's latest results. The firm expects future growth of 25 percent in this part of its business, so investors will no doubt be looking to see the four percent cloud currently accounts for grow significantly over the next few quarters. “We’re doing better in cloud than we expected,” Catz said.
On the hardware side, Oracle saw slight growth from $1.431bn to $1.466bn, a rise of $35m or 2.5 percent.
Despite the overall rise in revenues and profits for the year, the market reacted badly to Oracle’s latest results and Oracle shares were down by around 5.6 percent when trading opened on Friday.
Earnings were at 92 cents per share, and although this was up from 87 cents a share for the same quarter in 2013, analysts had set expectation at 95 cents a share on $11.48bn of revenue, according to a consensus estimate from Thomson Reuters. Oracle missed this by $160m.
Overall the firm is still in a healthy position, with revenues and profits that would be the envy of most in the tech sector. For its fiscal year 2014 to date, Oracle has increased revenue three percent from $37.18bn to $38.28bn, while profit has risen slightly by $30m to $10.96bn, up from $10.93bn.
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