Oracle Reports Sales That Miss Estimates on Slow Cloud Effort

Nico Grant (Bloomberg) -- Oracle Corp., the world’s second-largest software maker, reported sales that fell short of analysts’ estimates, in a sign the company is still stumbling in its transition to cloud computing.

Revenue was little changed at $9.2 billion in the fiscal first quarter, the Redwood City, California-based company said Monday in a statement. Analysts, on average, had projected sales of $9.26 billion, according to data compiled by Bloomberg. Profit, excluding some items, was 71 cents a share, compared with the average estimate of 68 cents.

Under Chief Executive Officers Safra Catz and Mark Hurd, Oracle is trying to become a powerhouse in web-based cloud computing. The company has prioritized converting existing clients to the cloud with a program called “Bring Your Own License,” rather than focusing on bringing in new customers. The effort so far has lagged behind rivals such as Amazon.com Inc., Microsoft Corp. and Salesforce.com Inc.

“Our channel checks suggest that Oracle is ‘losing people faster than [Oracle] can hire them’ and that customers continue to disapprove of Oracle’s sales tactics,” Pat Walravens, an analyst at JMP Securities, wrote in a note ahead of the release. These factors could have pinched the company’s performance, he wrote.

Oracle’s shift to the cloud has been at the center of a dispute between product development president Thomas Kurian and Executive Chairman Larry Ellison, people familiar with the company said last week, leading Kurian to take a leave of absence.

Oracle’s shares fell about 5 percent in extended trading after closing at $49.18 in New York. The stock gained 4.2 percent this year through Friday.

Oracle’s cloud services and license support revenue gained 3.2 percent to $6.61 billion. While the metric includes revenue from the cloud, a large portion of the total is likely from maintenance fees for traditional software housed on clients’ servers. The unit accounted for more than 70 percent of total revenue.

Cloud license and on-premise license sales declined 3 percent to $867 million.

The maker of business software has made it far harder to discern progress in its transition to the cloud. When the company reported fiscal 2018 fourth quarter earnings in June, it stopped breaking out sales for new software licenses and the performance of various cloud products, spurring investor angst, and sending the stock tumbling more than 7 percent the next day.

Kurian, the company’s president of product development, is said to have taken extended time off because he thought Oracle should make more software available on the clouds of rivals Amazon and Microsoft while Ellison is said to have disagreed, people familiar with the matter told Bloomberg last week.

The company is also facing a shareholder lawsuit filed last month, alleging that Oracle used strong-arm tactics to coerce customers into adopting its cloud products. The suit, seeking class-action status, also alleged the software maker deceived investors about how it had increased cloud sales.