Oracle (ORCL) this afternoon reported fiscal Q2 revenue and earnings per share below analysts’ estimates.
Revenue in the three months ended in November rose 2%, year over year, to $8.8 billion, yielding earnings per share of 54 cents, excluding some costs.
Analysts had been modeling $9.2 billion and 57 cents.
The company said its board of directors approved $5 billion in new share repurchases, to be carried out “in future quarters.”
Oracle’s co-president, Mark Hurd, remarked that the company had added 1,700 salespeople in the first two quarters of the year, which he said would contribute “solid organic growth in the second half of the year.”
Founder and CEO Larry Ellison remarked that sales of the company’s “Exadata” hardware appliance for database operations rose “well over 100%,” year over year. He said the company shipped its first clustered SPARC-based server system in the quarter.
The company will hold a conference call with analysts at 5 pm, Eastern time, this afternoon, and you can catch the Webcast here.
Oracle shares are down $2.32, or 8%, at $26.85 in late trading.
Shares of SAP also traded down, falling $2.63, or almost 5%, to $53.10.
Update: Among the first Street notes out of the chute, Lazard Capital Markets’s Joel Fishbein points to the disappointing rate of increase in new license revenue, which came in at $2.05 billion, below his $2.2 billion estimate. It appears foreign exchange effects reduced new license revenue by 1%, versus what had been expected to be 1% “tailwind,” he writes.
Database and middleware revenue, however, was also light, by Fishbein’s reckoning, at $1.46 billion, below his $1.58 billion estimate, which application revenue of $569 million missed his estimate for $647 million. Fishbein has a Buy rating on the stock and a $40 price target.
Citigroup‘s Walter Pritchard writes that hardware product revenue and support and services also look weak. “Weakness across geo looked broad-based,” he writes, “with Europe and Asia showing growth in database / middleware, but applications globally and U.S. database showing weakness.” Pritchard observes that Oracle managed to limit the damage to profit by not having to pay as much in sales commissions and by cutting operating expenses.
Pritchard maintains a Buy rating and a $34 price target.
Update 2: During management’s conference call with analysts, the company forecast revenue growth of 1% to 5%, year over year, in U.S. dollar terms in the current quarter, which would be $8.9 billion to $9.25 billion, below the current $9.46 billion consensus estimate. That would represent constant-currency growth of 3% to 7%, the company said. EPS is seen in a range of 56 cents to 59 cents, just under the consensus 59-cent estimate.
CFO and co-president Safra Catz remarked during the call that the company saw a sudden rise in approvals for software purchases late in November, and that better processes would be needed in future to close that last-minute business, a factor that affected new license sales.
Hardware sales were hit by companies holding off on purchases while they evaluated a new version of Oracle’s server hardware, said Catz. She said within software, ERP and CRM applications fared well. Growth was stronger in Latin America and Asia-Pacific than in Europe, The U.S. and Japan.
Catz noted the rise in operating profit margin to 45% and said the company was on track to return “shortly” to the profit margins it enjoyed before it bought Sun.
Update 3: Oracle shares have steepened their decline, now down $2.86, or almost 10%, at $26.31 in late trading.
During the Q&A portion of the conference call, Catz was asked by JP Morgan analyst John Difucci how the Street could believe this quarter’s outlook. Even below Street estimates, the revenue picture, he insisted, suggests a better-than-normal quarter-to-quarter increase, but the year-over-year comparisons this quarter in the U.S. and abroad look set to get tougher, not easier.
Catz remarked that the company would expect the current quarter to be “much more normal,” and that deals would be moved through Oracle’s approval process more efficiently:
What happened this quarter, we don’t actually expect that to repeat and I think we’ll have a much more normal next quarter. We have, as I said in the beginning, we’ve put in some measures so that we can monitor really what’s going on and make sure we are on time with the appropriate approvals.
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