Oracle blames U.S. dollar for disappointing Q4 earnings results

Oracle blamed currency fluctuations for its fourth quarter earnings miss, but a slowdown in new software licenses should get more of the blame.
Written by Rachel King, Contributor

Oracle published disappointing fourth quarter financial results after the bell on Wednesday, once again laying blame with a stronger U.S. dollar.

The tech giant reported a net income of $2.8 billion, or 62 cents per share (statement).

Non-GAAP earnings were 78 cents per share on a revenue of $10.7 billion.

Wall Street was looking for earnings of 87 cents per share with $10.95 billion in revenue.

That's down five percent from the year-ago quarter, but Oracle asserted it would have been up three percent if not for "the strengthening of the U.S. dollar."

Oracle shares started to tumble in after-hours trading, slumping by as much as seven percent after the report hit the wires.

Still, perhaps a slowdown in new software licenses should get more of the blame as they dropped 17 percent year-over-year.

Software and Cloud revenues for the quarter totaled $8.4 billion, down six percent but up two percent in constant currency.

"We expect our rapidly increasing cloud sales to quickly translate into significantly more revenue and profits for Oracle Corporation," promised Oracle CEO Safra Catz, in prepared remarks. "For example, SaaS and PaaS revenues grew at a 34 percent constant currency rate in our just completed Q4, but we expect that revenue growth rate to jump to around 60 percent in constant currency this new fiscal year."

For fiscal year 2015, total revenue was $38.2 billion. That breaks down to $29.5 billion for software and cloud along with $5.2 billion for hardware.

On a conference call with analysts, Oracle executives pinned the quarter almost entirely on currency fluctuations. Catz said she was "delighted" with the results and noted the company "overachieved in the cloud."

Catz said:

This is the first Q4 where we had everything together for the cloud. We had the products that we've been working on for a decade, the operations, the salesforce, and the references with many, many happy customers. Having all that in place caused SaaS PaaS bookings to grow more than 200%, our best ever growth rate for cloud bookings and more than $125 million higher than our own $300 million goal.

Catz added that she'll take the tradeoff between new license declines and cloud growth. She said:

New software licensed revenue worth $3.1 billion reflecting the accelerated migration to cloud. The shift to cloud was very pronounced in Europe, where new software license sales were most impacted. But Europe was also our fastest growing region for both cloud revenue and bookings, as you would expect from the substitution.

As for the outlook, Catz said that first quarter constant currency growth will be between 39 percent and 43 percent for SaaS and PaaS revenue. Software and cloud revenue should grow between 6 percent and 8 percent. Total revenue growth will be between 5 percent and 8 percent. Non-GAAP earnings in constant currency will be between 56 cents a share and 59 cents a share.

Looking forward, Wall Street is expecting Oracle to start off the new year with fiscal first quarter non-GAAP earnings of 61 cents per share with $8.62 billion in revenue.

Oracle spent a lot of time talking cloud. Oracle said it added 1,217 SaaS customers in the quarter with 760 customers expanding. In ERP, Oracle said its cloud installed base is 1,100.

Customers and analysts can expect more news on the cloud front soon as Oracle chairman and CTO Larry Ellison will be presenting the next phase of the tech company's strategy at corporate headquarters on Monday.

In the Q4 report, Ellison reiterated Oracle's goal to achieve between $1.5 billion to $2 billion in new SaaS and PaaS bookings by the end of this fiscal year, aiming to surpass rival Salesforce.com and take over the market.

As our multi-billion dollar cloud business gets bigger, our SaaS and PaaS revenue growth rates are on their way up to 60 percent in constant currency," wrote Oracle CEO Mark Hurd, "Compare this to our primary cloud competitors' whose own revenue growth forecasts are on their way down to 44 percent and 22 percent."

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