Oracle (ORCL) recently released its results for the fourth quarter, which were not so impressive. The company failed to post impressive revenue and earnings. The shares of Oracle also nosedived as investors didn’t receive the results positively. It is a serious issue for the company to check. However, management thinks that Oracle can still perform better on the back of some good moves that the company is planning, including some acquisitions and transitions.
In the recently reported quarter, Oracle posted revenue of $11.3 billion, which was up by 3% from last year. But the top line didn’t match analysts’ estimates. On the earnings front, the company posted EPS of $0.92, which is more than $0.87 per share as compared to last year. This also missed consensus estimates.
Trying to improve
Oracle’s results weren't as expected. Some think it to be a seasonal weakness while the company has another defense. Oracle is undergoing a transition in its business. The company is making impressive advancements in the transitioning to cloud software. Oracle is seeing good growth as a result of this transition and is expecting this to take the company to new levels of profitability.
The company is pleased to have new licensed SaaS and PaaS, which are together called software and cloud revenue, which are helping Oracle in a meaningful way. Also, Oracle is now enhancing its services including consulting, advanced customer support services and education. Oracle is laser focused on becoming a leading company in the cloud computing segment in the coming years.
For achieving this goal, Oracle is now busy in strengthening its SaaS product portfolio in the cloud. It has some exciting features which are surely strengthening its SaaS offering. For example, CRM sales, CRM service, marketing, core human resources, recruiting, talent management and payroll and in ERP accounting, procurement, supply chain, project management and more.
Moving further, Oracle is also strengthening its sales force to enhance sales for its SaaS and PaaS subscription in the cloud business. With this move, Oracle wants to hold a competitive edge among the competitors in the market.
With the ERP offering, Oracle is already seeing a good hold over the market. It has acquired 120 new cloud ERP customers, which is a good sign for it, and which it is expected to improve further in the coming days. Moving to the hardware segment, Oracle is improving at a good pace. The hardware margins for the company are now approaching 70%, which provides bright opportunities for Oracle in the hardware segment also. Further, the company has already received an order to ship 10,000 engineered systems in the first quarter of fiscal 2015.
Seeing the growth momentum in the cloud business, Oracle is gunning for a better position than its rivals such as Salesforce (CRM) and Workday (WDAY). The company is looking at the statistics which reveal that Oracle is adding new customers at a rate better than Workday, which has been in this cloud business for a long time. Oracle has added 320 new customers with its HCM offering while Workday just saw 75 new customers lately. Also with the acquisition of LiveLOOK, the company is now enhancing its offering as it has more than 100 global customers using LiveLOOK’s technology.
Oracle looks cheap with a trailing P/E of 17.41 while its earnings have a slight room for improving in the future, which is indicated by the forward P/E of 12.10. However, the long-term prospects of the company don’t look strong. Its earnings are growing with a CAGR of just 9.47%, which is very less as compared to the industry average of 21.34%. So, investors should stay away from Oracle as of now till it shows some concrete signs of gaining market share in the future.