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Oracle Sees Stronger Sales Growth in Cloud Transition
Oracle reported a strong sales forecast, signaling that it expects greater customer demand in its transition to becoming a cloud provider•Revenue from cloud services and license support, which includes maintenance fees for traditional software, grew 2.7 percent to $6.64 billion•Oracle’s new cloud and on-premises licenses sales fell 8.5 percent to $1.22 billion•The company’s founder Larry Ellison said cloud transition had been slow because it didn’t have good enough infrastructure until recently, but analysts question that explanation.
Bloomberg
December 18, 2018
2 Min Read
Oracle co-founder, chairman, and CTO Larry Ellison delivers a keynote at Oracle OpenWorld on October 22, 2018 in San Francisco.Justin Sullivan/Getty Images
Nico Grant and Ian King (Bloomberg) -- Oracle Corp.’s shares rose on a strong sales forecast, signaling the world’s second-largest software maker expects greater customer demand in its transition to cloud-based computing.
Revenue will increase 2 percent to 4 percent in the current quarter, holding currency exchange rates constant, with higher growth through the second half of the fiscal year, Chief Executive Officer Safra Catz said Monday in a conference call with analysts. Adjusted profit is projected at 83 cents a share to 85 cents a share in the fiscal third quarter. Analysts estimated 84 cents.
Oracle earlier reported fiscal second-quarter sales that were in line with analysts’ estimates. Shares increased about 5 percent in extended trading.
Key Insights
Catz and Chief Executive Officer Mark Hurd have sought to move the information technology company’s 430,000 customers to internet-based software from programs housed on their corporate servers, as a way to keep up with the rapid sales growth of Amazon.com Inc.’s cloud unit, Salesforce.com Inc. and others.
Sales were little changed at $9.56 billion in the fiscal second quarter. Analysts, on average, had projected $9.52 billion, according to data compiled by Bloomberg.
Revenue from Oracle’s cloud services and license support, which includes maintenance fees for its traditional software, grew 2.7 percent to $6.64 billion.
Oracle’s new cloud and on-premise licenses sales fell 8.5 percent to $1.22 billion.
Analyst’s View
Oracle’s report and predictions helped defuse concern that corporate spending on infrastructure is declining and gave investors hope that the company can return to stronger revenue growth, said Patrick Walravens, an analyst at JMP Securities.
Executive Chairman Larry Ellison’s comments on the conference call also provided an explanation of why Oracle’s attempt to turn its database clients into cloud customers hasn’t happened as quickly as some had hoped, Walravens said. Ellison said Oracle didn’t have good enough computing infrastructure in place until recently to support cloud customers.
“Larry’s brilliant, but our due diligence suggests that there’s more to it than that,” Walravens said. “I think there will be some debate about whether that is a sufficient explanation.”
Market Reaction
Oracle shares rose to a high of $48.18 in extended trading after closing $45.73. The stock has declined 3.3 percent this year.
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