Summary Oracle is striving to boost Internet-based software sales to head off fast-growing competitors.
REUTERS - Oracle Corp s sales fell more than expected in the first quarter, hurt by a strong dollar and a continued drop in licensed software sales and the company warned revenue could fall in the current quarter even on a constant currency basis.
Like its rivals such as SAP, IBM Corp and Microsoft Corp, Oracle is striving to boost Internet-based software sales to head off fast-growing competitors such as Salesforce.com Inc.
But, analysts have said Oracle s cloud software business has not been growing fast enough to make up for declines in the 38-year-old company s licensed software business due to reasons ranging from slow customer adoption to tough competition.
Oracle s revenue declined 1.7 percent to $8.45 billion in the quarter ended Aug. 31, missing analysts estimates for the third quarter in a row.
The company said sales increased 7 percent on a constant currency basis. However, it forecast revenue to range between a fall of 2 percent to growth of 1 percent in the current quarter.
"On an apples-to-apples basis, that s disappointing. It s pretty clearly below consensus even at the top end," Wedbush Securities Inc analyst Steve Koenig said.
Oracle s shares fell as much as 2.8 percent in extended trading on Wednesday.
The company s net income declined 20 percent to $1.75 billion in the first quarter. Excluding items, it earned 53 cents per share, more than analysts estimate of 52 cents.
Sales of Oracle s cloud-computing software and platform service rose 34 percent to $451 million. Sales of traditional software licenses fell 16 percent to $1.51 billion.
Wall Street was expecting cloud-based sales to increase 35 percent and licensed software sales to decline 17 percent, according to RBC Capital Markets.
"In the foreseeable future the database business continues to be a dark cloud over the company s head," FBR Capital Markets analyst Daniel Ives said.
Cloud-based software sales account for a small portion of Oracles total revenue as they are subscription based, which promise a steady revenue stream but with lower margins.
Fundamentally, all of Oracle s software will be available on the cloud by the OpenWorld conference at the end of October, Co-Chief Executive Mark Hurd said on a call with analysts.
Ives said Oracle needs to make acquisitions to fuel growth in its cloud business and convince investors who are sceptical of a turnaround.
He named Splunk Inc, Tableau Software Inc (DATA.N), NetSuite Inc (N.N) and Workday Inc as "game-changing" acquisitions for Oracle.
