Oracle throws wet blanket on strong 4Q results
Loading ...Oracle Corp. finished its fiscal year with an impressive flourish, then pulled out a wet blanket.
After announcing fourth-quarter results that exceeded analyst estimates, the business software maker dampened investor sentiment late Wednesday by raising the specter of a slowdown in the traditionally sluggish summer months.
The tepid outlook caused Oracle shares to drop by 3.5 percent in Wednesday’s after-hours trading, dragged down by concerns that the decrepit U.S. economy may finally be sapping some of technology sector’s vitality.
Given all the economic uncertainty, it makes sense for Oracle’s management to set easily reachable targets, said Pacific Crest Securities analyst Brendan Barnicle.
“I think companies are realizing that you don’t really get rewarded for raising guidance, so there is no reason to be a hero in an environment like this,” Barnicle said.
Oracle shares fell 78 cents in extended trading after finishing the regular session at $22.55, up 32 cents.
The Redwood Shores-based company earned $2.04 billion, or 39 cents per share, in the three months ending in May, up 27 percent from $1.6 billion or 31 cents per share at the same time last year.
Oracle usually posts a strong fourth quarter because its sales force pulls out all the stops to close deals in an effort to boost year-end bonuses. Realizing they are more likely to get discounts, many of Oracle’s corporate customers hold off their purchases until this period too.
But Oracle’s quarter was even more prosperous than Wall Street had hoped.
If not for expenses related to acquisitions and employee stock awards, Oracle said it would have made 47 cents per share — 3 cents more than the average estimate among analysts polled by Thomson Financial.
Revenue totaled $7.24 billion, a 24 percent gain from last year’s $5.83 billion in the same period and nearly $400 million above the average analyst projections.
Perhaps most important to investors, Oracle’s software sales accelerated well beyond the 10 percent to 20 percent growth rate management forecast three months ago. Oracle’s new software licenses in the quarter were up 27 percent.
That robust growth is significant because sales of new software produce a steady stream of future revenue from product updates and maintenance.
But management doesn’t expect the momentum to extend into its fiscal first quarter, which will end in August. Oracle projected new software licenses will rise 10 percent to 20 percent during the summer, compared with a 35 percent gain in the same period last summer.
Excluding acquisition and stock compensation costs, Oracle expects its first-quarter earnings to be 26 cents or 27 cents per share. Analysts, on average, had already forecast 27 cents per share.
With the strong fourth-quarter showing, Oracle joins several other major tech companies that are weathering the economic turbulence battering financial services, travel and retail.
“The fact that we put up these results in these times demonstrates our strategy is working,” Safra Catz, Oracle’s chief financial officer, said in a conference call with analysts.
Technology generally has proven a safe haven so far, largely because corporations still need computers and software to navigate through the economy’s downturn.
At large technology companies like Oracle, Hewlett-Packard Co., IBM Corp., Intel Corp., Google Inc., Apple Inc. and Cisco Systems Inc., international sales and the weakening dollar have helped offset slowing demand in the United States.
If the dollar were as strong as it was a year ago, Oracle estimated its fourth-quarter profit would have risen a more modest 14 percent.
The strong fourth-quarter performance also indicates Oracle is gaining ground on SAP AG, the longtime leader in so-called business applications software — the computer coding that enables companies, schools and government agencies to automate administrative tasks.
Oracle has spent about $35 billion during the past three years buying dozens of smaller rivals, primarily to mount a more serious challenge to Germany-based SAP in business applications software.
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