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Oracle Falls on Q4 Earnings Miss, Blames Currency Effects Again

A strong U.S. dollar continues to hurt the software giant.

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Shares of business software giant Oracle fell in after-hours trading as the company reported results that fell short of analyst expectations, blaming the continued strength of the dollar compared to international currencies.

Oracle posted earnings per share of 78 cents on revenue of $10.7 billion. The company said in a statement that revenue fell 5 percent but after backing out the “significant effects” of currency exchange rates would have been up by 3 percent. Oracle shares fell more than 5 percent in after-hours trading.

The results fell well short of what analysts surveyed by Thomson Reuters had expected: Earnings per share of 87 cents on revenue of $10.95 billion, in what is typically the company’s strongest quarter. Oracle CEO Safra Catz forecast per-share earnings of 56 to 59 cents in the first quarter, lower than the 61-cent consensus, but sales between $9 billion and $9.3 billion, or up between 5 and 8 percent on a constant currency basis.

On a conference call, Catz warned that currency markets “continue to move significantly and remain unpredictable,” and so might continue to affect Oracle’s results.

New software licenses, a closely watched number that amounts to nearly a third of Oracle’s business, fell 17 percent to $3.1 billion, or a 10 percent decline on a constant currency basis. Software license updates and support revenue came in flat at $4.7 billion, or up 8 percent after adjusting for currency.

It was the latest quarter in which Oracle has struggled to compensate for the strong U.S. dollar versus international currencies like the euro and the Japanese yen. As a U.S.-based company that does a lot of business overseas, Oracle sales suffer when its customers pay it in those currencies when the dollar is strong. When Oracle last reported results in March, it said currency effects hurt its per-share earnings by six cents.

Software and cloud revenues came in at a combined $8.4 billion, amounting to a decrease of 6 percent, but after adjusting for currency effects would have grown 2 percent. Hardware sales fell 4 percent to $1.4 billion but would be up 5 percent after adjusting for currencies.

Cloud software revenue by itself, which Oracle has represented as the strategic future of the company, reached $416 million, up 29 percent and up 35 percent on a constant currency basis. That significantly beat the $300 million the company forecast, but wasn’t a big enough portion of Oracle’s business to move the needle on results. Cloud infrastructure service revenues reached $160 million, up 25 percent or 31 percent on constant currency basis. Catz said in the statement that Oracle expects the rate of growth in cloud software to reach 60 percent in the 2016 fiscal year already started.

On a conference call CEO Mark Hurd and CTO Larry Ellison sounded aggressive notes around Oracle’s still-new cloud business. Hurd predicted that in the 2016 fiscal year, Oracle will be the “largest enterprise cloud company by revenue,” eclipsing rivals Salesforce and Workday.

Ellison claimed that in the quarter just ended, Oracle’s $426 million in combined sales of software-as-a-service and platform-as-a-service amounted to a record for cloud software sold by any company in a single quarter. He also said it’s “possible but not likely” that Oracle could sell twice the level of cloud software to new customers as Salesforce in the coming year. He also said that Oracle expects to grow its SaaS and PaaS business by 60 percent in the coming year “unaided by acquisitions.”

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