Oracle Profit Falls 20% On Stronger Dollar

(RTTNews) - Oracle Corp. (ORCL) said Wednesday after the markets closed that its first quarter profit fell 20% from last year, hurt significantly by a stronger U.S. dollar.

However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast.

"Our traditional on-premise software business plus our new cloud business grew at a combined rate of 6% 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. As our cloud business scales-up, we plan to double our SaaS and PaaS cloud margins over the next two years -- starting from 40% this just completed Q1, to approximately 60% this coming Q4, and then on up to 80% two years from now. Rapidly growing cloud revenue combined with a doubling of cloud margins will have a huge impact on EPS growth going forward."

The company also declared a quarterly cash dividend of $0.15 per share, payable on October 28 to shareholders of record on October 14.

Oracle shares are currently losing 0.94% in after hours trading after closing the day's regular trading trading session at $38.27, up 28 cents. The shares trade in a 52-week range of $35.14 to $46.71.

Oracle has adopted an acquisition-led growth strategy. The company has acquired more than 73 companies since 2005. Of late, Oracle has set its eyes on cloud-based software firms. Last month, Oracle agreed to buy Maxymiser, a provider of cloud-based software that enables marketers to test, target and personalize what a customer sees on a web page or mobile app, substantially increasing engagement and revenue.

However, Oracle' revenue growth has slowed down in the last few quarters, raising investor concern about the company's ability to transition from its traditional approach of licensing software to the so called cloud computing method.

Oracle shuffled its top management in September last year. Company founder Larry Ellison stepped down as CEO after 37 years and became Executive Chairman and Chief Technology Officer. Both Mark Hurd and Safra Catz were promoted to the position of CEO.

Oracle's total On-Premise software and cloud revenues for the first quarter fell 2% year-over-year to $6.5 billion, with new software licenses revenues down 16% at $1.15 billion. Cloud software-as-a-service and platform-as-a-service surged 34% to $451 million in the first quarter.

First quarter software license updates and product support revenues declined 1% from last year to $4.7 billion. Services revenues for the quarter grew 1% to $862 million.

Total hardware revenues for the quarter fell 3% to $1.1 billion, with hardware products revenue down 1% and hardware support revenue down 5%.

For the first quarter ended August 31, 2015, Redwood Shores, California-based Oracle reported net income of $1.75 billion or $0.40 per share, compared to $2.18 billion or $0.48 per share for the year-ago quarter.

Excluding items, adjusted net income for the first quarter was $2.35 billion or $0.53 per share, compared to $2.81 billion or $0.62 per share in the prior year quarter.

On average, 32 analysts polled by Thomson Reuters expected the company to earn $0.52 per share for the first quarter. Analysts' estimates typically exclude special items.

Total revenue for the first quarter fell 2% to $8.45 billion from $8.60 billion a year earlier. Thirty analysts had a consensus revenue estimate of $8.53 billion for the first quarter.

Without the impact of the stronger U.S. dollar, Oracle said its earnings per share would have been $0.06 higher and its total revenues would have been up 7%.