Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Oracle’s Results Weren’t So Bad, After All

Shares of enterprise software giant Oracle are falling this morning after the company reported earnings that beat expectations, but included a weaker-than-expected outlook for the quarter ahead.

Oracle shares fell by nearly one percent, to $33.60, as of 10:20 am ET.

The company’s results have been uneven for the last few quarters, as demand for corporate IT products has slowed in recent years. As president Mark Hurd put it on a conference call with analysts, Oracle is muddling through a weak-demand environment along with everyone else: “We read all of our peer groups’ results. And to be very blunt, they’re not very good. So depending on who you’re talking about, most of their numbers are negative.”

Part of the problem with the outlook was that it was a tough comparison. In the second quarter last year, new cloud revenue grew by 18 percent, an unusually high rate, so it makes meeting the results — let along beating them — kind of difficult. As CFO Safra Catz put it, “this will be a very, very tough comparison … Our sales leaders remain very careful about what they are forecasting to us.”

Even so, it wasn’t such a bad quarter. In fact, as Stifel Nicolaus analyst Brad Reback put it, it was kind of good. Software sales remained solid, he said, making the quarter’s results and its outlook not so bad after all.

Revenue from new licenses was at nearly $1.7 billion, ahead of expectations, and that was despite a currency headwind that was twice as bad as expected. Added to that, there was healthy demand in, of all places, the government-spending sector. “We think that some of the changes the company made over a year ago are finally starting to take hold,” Reback said.

Hardware revenue remained, as Reback called it, “a sore spot.” As the dwindling business of selling older hardware dragged down hardware sales, the “Exa” family of “engineered systems” gained traction with some customers, but at the lower-priced end of its range. “Although we still think this business has the potential to be a modest grower, we don’t expect that to happen until at least fiscal year 2015,” Reback wrote.

Overall, he thinks that Street expectations for Oracle’s second fiscal quarter were unrealistic to begin with: “We think the company has addressed many of its recent sales execution issues and should benefit from its immense pipeline, improving sales productivity, and numerous new products, over the next several quarters.”

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik