Oracle investors breathe a sigh of relief on rising sales

San Francisco

ORACLE Corp's shares climbed after the world's second-largest software maker returned to sales growth and gave a forecast indicating that the momentum may continue.

For investors, the results were a reprieve amid the company's uneven transition to cloud-based computing.

Revenue increased 1.1 per cent to US$11.1 billion in the period ended May 31 from a year earlier, the Redwood City, California-based company said in a statement on Wednesday.

Analysts, on average, projected US$10.9 billion, according to data compiled by Bloomberg. Oracle predicted that sales would grow by as much as 2 per cent in the current period.

Chief executive officers Safra Catz and Mark Hurd have sought to maintain Oracle's large customer base as the company competes with a dizzying number of rivals in the cloud-computing space. The software maker's stumbles against Amazon.com Inc and others have spurred it to seek help from unlikely sources.

Earlier this month, Oracle announced an alliance with long-time rival Microsoft Corp, letting customers use their respective clouds. The period marked Oracle's first year-on-year increase in total revenue since the fiscal first quarter.

Oracle shares jumped about 5 per cent in extended trading after closing at US$52.68 in New York. The stock has gained 17 per cent this year. Profit, excluding some expenses, will be 80 to 82 US cents a share in the period that ends in August, Ms Catz said in a conference call. The forecast is in line with Wall Street's average estimate of 81 US cents.

Oracle reported an adjusted profit of US$1.16 a share in the fiscal fourth quarter, compared with estimates of US$1.07 a share.

Pat Walravens, an analyst at JMP Securities, said Oracle's sales and profit outlook brought relief to concerned investors. "These are small numbers, but we seem to be making some progress," he said. "Oracle is doing a nice job on the applications side, but on the infrastructure side, you're competing against Microsoft, Amazon Web Services and the Google Cloud. That remains highly competitive."

Larry Ellison, Oracle's billionaire co-founder and executive chairman, said some corporate applications for the cloud are finally boosting overall growth, even as product lines like the company's data-broker business declined.

"We are focused on our star products and our star products are now driving the top line higher," he said on the call. "We have these other businesses that are melting away and we just don't care."

Cloud licence and on-premise licence sales increased 12 per cent to US$2.52 billion, suggesting that Oracle is doing a good job of signing on new customers. The company said that revenue from NetSuite grew 32 per cent, and Fusion HR and financial suites gained by the same amount.

Mr Hurd has been keen to chase growth by selling apps and setting a target for attaining 50 per cent market share to best rival SAP SE. Revenue from cloud services and licence support was unchanged at US$6.8 billion in the quarter, Oracle said.

While that metric includes revenue from hosting customers' data on the cloud, a large portion is generated by maintenance fees for traditional software housed on clients' servers. The unit accounted for more than 60 per cent of total revenue. Sales of Oracle's servers declined 11 per cent in the period.

Ms Catz said the company has chosen to "downsize our low-margin legacy hardware business", which Oracle acquired when it bought Sun Microsystems.

Oracle has been firing workers around the world to cut expenses. The company's adjusted operating margin reached 47 per cent, the highest in five years. The company's costs related to restructuring doubled to US$168 million in the quarter from the preceding year.

The deal between Oracle and Microsoft will enable mutual customers to connect databases on Oracle's cloud to applications on Microsoft's Azure cloud. The agreement signified a concession by Oracle that it won't be able to compete against Amazon Web Services (AWS) alone. AWS offers cheaper versions of the databases that make up Oracle's core business. BLOOMBERG