Oracle misses as it struggles to reinvent itself

The business software company couldn't meet sales or profit expectations in its recent quarter amid a transition to cloud software.

By Benzinga Mar 18, 2014 5:14PM

File photo of Oracle Corp. headquarters in Redwood City, Calif. (© David Paul Morris/Bloomberg via Getty Images)By Louis Bedigian


Oracle (ORCL) once again missed earnings expectations Tuesday and saw shares drop in after-hours trading as investors punished the stock.


The business software company is going through a transitional period, so few analysts expected big results in the quarter. Still, the company couldn't deliver the sales and profit Wall Street wanted to see.


Third-quarter earnings came in at 68 cents a share, about 2 cents lower than that analysts expected. Revenue arrived at $9.31 billion, which was also lower than the Street estimate of $9.36 billion.


Despite the earnings miss, Oracle's earnings per share were up 5 percent from the year-ago period. Sales were up 4 percent year-over-year.


The stock fell more than 5 percent in after-hours trading to $36.81.


Historically, these kinds of misses are unusual for Oracle. But analysts have given the company a good deal of leeway as it struggles to rejuvenate growth and transition to cloud software applications.


"I think Oracle is also going through a reinvention," Global Equities Research analyst Trip Chowdhry told Benzinga. "They are reinventing themselves. So it may take, probably, more than a few quarters. I think the revenue catalyst will come around October of this year."


Mixed Trends

Oracle has enjoyed somewhat of an upward trend over the last couple of the years. The stock has risen more than 28 percent since March 2012.


That's a small sum compared to Wall Street's biggest gainers. But Oracle has had some interesting patterns.


The stock plummeted more than 4 percent during the first week of May 2012 and continued to tumble for the next several days. Oracle ultimately lost more than 13 percent of its value between May 2 and May 18, 2012.


After that, the company began to rise again. Oracle gained more than 28 percent over the next four months. There were a few dips along the way, but the gains definitely outweighed the losses.


This has been the trend for Oracle, which went on to have several more growth spurts. There was a downward trend in 2013 that threatened to diminish the company's value, but Oracle ultimately overcame it and is slowly approaching its all-time high of $45.47, which was achieved in August 2000.


The stock closed Tuesday up 1.6 percent to $38.83 (up 1.6 percent).


The lower-than-expected earnings results indicate that Oracle may still have some work to do before it can provide Wall Street with the level of growth it desires. That said, Chowdhry believes that the company will ultimately persevere.


"Historically, Oracle has proven that it can reinvent themselves and it can make smart acquisitions and they can overcome [its] threats and challenges," Chowdhry concluded, noting that the revenue catalysts are at least six to eight months away.


Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.


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4Comments
Mar 18, 2014 6:10PM
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Not to mention they failed miserably on Oregon's health insurance website
Mar 19, 2014 9:31AM
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So we are going to wait and see for a few more quarters. Ever notice good news is quickly incoporated by the analists and poor news is put off for later.  Sort of having your cake and eat it too.  This in time will pass but geez folks this is 1999 all over again.
Mar 20, 2014 9:36AM
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ORCL is no longer a growth company and doesn't pay much of a dividend.  Then, misses on earnings and revenues. CRM, WDAY, MSFT and AMZN have left them behind in the cloud.  This is a sell! 
Mar 19, 2014 1:10AM
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