Oracle expects flat sales on fewer corporate software deals

San Francisco

ORACLE Corp projected stagnant revenue in the current quarter, signalling the company may not see a revival of new licence sales after clients in the hospitality and retail industries delayed software purchases amid the coronavirus pandemic.

Sales will be in a range of a 1 per cent gain to a 1 per cent decline year-over-year in the period ending in August, chief executive officer Safra Catz said on Tuesday in a conference call. The midpoint of no revenue growth matched analysts' estimates, according to data compiled by Bloomberg. Excluding some items, profit will be 84 US cents to 88 US cents a share, with the midpoint again in line with analysts' projections.

Ms Catz and executive chairman Larry Ellison have sought to renew growth at Oracle, the world's second-biggest software maker, which has expanded to cloud applications, servers and public cloud services. The shift to internet-based computing caught the 43-year-old tech giant off guard and it's still struggling to switch existing database customers to cloud-based offerings and better compete against Amazon.com Inc and Microsoft Corp In the fiscal fourth quarter, revenue declined 6.3 per cent to US$10.4 billion, missing analysts' estimates of US$10.7 billion.

Cloud licence and on-premise licence sales declined 22 per cent to US$1.96 billion in the period ended May 31, the Redwood City, California-based company said earlier in a statement, suggesting the company is signing fewer new deals. Oracle's software for managing data, corporate finances, employees and customers require elaborate and often expensive installations, but during the Covid-19 pandemic, companies held off on getting new products. "Our overall business did remarkably well considering the pandemic, but our results would have been even better except for customers in the hardest-hit industries that we serve such as hospitality, retail, and transportation postponing some of their purchases," Ms Catz said in the statement.

The software maker says some of those conversations with prospective customers have now resumed. "It was a disappointing quarter," said Hari Srinivasan, an analyst at Neuberger Berman, which has been a long-term Oracle investor. "We were expecting a decline because although Oracle's products are important for enterprises, that's not where the spending is. Most companies are spending on getting employees working from home and the cloud." The company's sales may be weak for the next two or three quarters until spending recovers, he added.

Shares declined about 3.5 per cent in extended trading after closing at US$54.59. The stock has climbed 3 per cent since the start of the year.

Ms Catz said she expects Oracle's revenue will accelerate this year, but didn't provide a forecast for annual sales. She also said the company's growing businesses now represent a larger share of overall revenue than its declining legacy product lines, which should aid sales growth in the future.

Oracle said that revenue from cloud-based accounting and financial planning software climbed 32 per cent in the quarter from a year earlier. The company's software for managing employees increased 27 per cent. Oracle didn't disclose total sales of the products, which compete against those from Workday Inc.

Revenue from cloud services and license support increased 1 per cent to US$6.85 billion. That metric includes sales from hosting customers' data on the cloud, but a large portion is generated by maintenance fees for traditional software housed on clients' corporate servers, which gives Oracle a predictable revenue base.

Profit, excluding some items, was US$1.20 a share, compared with analysts' average estimate of $1.15. BLOOMBERG