Oracle executives insisted that the company was not trying to hide anything from Wall Street, as the US software company’s share price slid 4 per cent in the wake of a change in its financial disclosures and a weak financial forecast.
The decline came after Oracle issued a quarterly earnings release that for the first time did not separate out the performance of its closely watched cloud business. The growth rate from the cloud operations has slowed rapidly over recent quarters, leading to a series of cuts to analysts’ growth forecasts.
“First of all, there’s no hiding,” co-chief executive Safra Catz insisted on a conference call with analysts late on Tuesday, after being asked if Oracle was running the risk of being accused of “obfuscating cloud weakness”.
She pointed out that Oracle had disclosed its latest cloud revenue on the call, even though this was not part of its new formal breakdown. At $1.7bn, the number showed “we are right where we said we’d be. No hiding . . . We don’t have any bad news,” she said.
Mark Hurd, co-CEO, added: “This is a nothing-burger. There’s just nothing here.”
The growth rate in Oracle’s cloud business, which accounts for 15 per cent of total revenues, has halved over the past year. That has led Wall Street to rethink its earlier confidence that the company was well on the way to making a successful transition away from its traditional software business, as Microsoft had before it.
Ms Catz said Oracle had altered its financial disclosure because of a change in its business model that had blurred the line between the cloud and its traditional business, of selling licences for software that customers deploy on their own computers. Under a new arrangement called BYOL, for “bring your own licence”, Oracle now lets customers continue to use the traditional software model — paying an upfront licence fee followed by regular support payments — while getting access to the software through the cloud.
Oracle issued a downbeat forecast for first-quarter earnings on its analyst call, reversing the more positive mood created only an hour before by the publication of stronger than expected numbers for the fourth quarter. Ms Catz put the lowered forecasts down to the strengthening of the US dollar since the company last issued guidance.
For the fourth quarter, Oracle had been expected to show growth in cloud revenues of around 25 per cent, with revenue from its traditional software licensing business falling by 9 per cent. Instead, it combined its licensing revenue from both cloud and traditional businesses, reporting sales for this segment of $2.6bn, down 5 per cent from a year before.
It also combined its other cloud services with its traditional software support business. Together, these operations produced revenue of $6.3bn, up 8 per cent from the year before.
Overall, Oracle reported revenue of $11.3bn, up 3 per cent and ahead of the $11.2bn that had been expected. On a pro-forma basis, earnings per share rose 11 per cent to 99 cents, above the consensus analyst forecast of 92 cents.