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Oracle Q2 Results Beat Street; Ellison Says Cloud Business on Track

Founder and CTO Larry Ellison says plans for $1.5 billion in new cloud business are still on track for the fiscal year.

Asa Mathat

Oracle shares rose by more than 2 percent in after-hours trading after it posted a per-share profit of 63 cents on revenue of $9 billion after analysts had forecast 60 cents per share on revenue of $9.06 billion. Oracle shares were up by nearly 2 percent during the regular session to close at $38.91.

Revenue fell 6 percent year-on-year but was unchanged after adjusting for the effects of currency exchange rates.

Oracle Chairman and CTO Larry Ellison sounded an aggressive note in a statement, saying the company is still on track to book $1.5 billion in software-as-a-service and platform-as-a-service business in the fiscal year. Total cloud revenue during the quarter was $649 million, up 26 percent, or 31 percent after adjusting for currency effects.

Revenue from the sale of Oracle’s traditional on-premise software was $6.4 billion, down 7 percent and flat after backing out currency effects. Hardware sales were $1.1 billion, amounting to a 16 percent decline, or 10 percent after adjusting for currency effects. Services revenue was $861 million, down 8 percent or flat after backing out currency effects.

Separately from the earnings report, Oracle said it had named Renée James, a former executive at Intel, to its board of directors. James left Intel over the summer, after becoming the second-most senior executive after CEO Brian Krzanich. She and Krzanich had made an unusual joint pitch to lead the chip maker after former CEO Paul Otellini retired in 2013. When she left, she said she intended to look for a CEO job at another company, and usually taking a board seat or two at a high profile company is a step in that process.

On a conference call, CEO Safra Catz said Oracle is expecting cloud revenue to achieve a 50 percent growth rate in the third quarter and could accelerate beyond that in the fourth. She said the growth of SaaS and PaaS product is starting to rise to sufficient levels that it’s beginning to show up in profit margins, meaning that at long last, it’s starting to move the needle. That’s a positive sign that Oracle’s transition to the cloud is taking hold even though a majority of its business still lies with the old-school on-premise software.

Catz said Oracle expects third-quarter per-share profit to be between 63 cents and 66 cents and revenue to be flat to up 3 percent, mainly driven by growth in cloud sales. She also gave preliminary guidance for the fourth quarter, saying Oracle expects revenue to grow 1 percent to 3 percent year-on-year and per-share profits of 83 to 86 cents. The guidance was on a constant currency basis, and assumed no change in exchange rates from today.

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