Oracle Corp, the American business software developer, released its profit forecast for the third quarter which didn’t exactly meet analysts’ expectations.
That resulted in the company’s shares falling 1 per cent in extended trading.
The tight margins with which the company is currently facing are the result of Oracle’s aggressive shift from licensing software to cloud-based subscriptions.
Oracle, like other established technology companies, has been moving its business to the cloud-based model, essentially providing services remotely via data centres rather than selling installed software.
"This is a softer outlook than the Street was expecting and speaks to the massive growth challenges ahead," FBR Capital Markets analyst Daniel Ives said.
Reuters reported that Oracle forecast third-quarter profit of about 63-66 cents per share, with revenue flat or up 3 per cent which translates to $9.33 billion-$9.61 billion.
Analysts on average were expecting profit of 65 cents per share on revenue of $9.28 billion, according to Thomson Reuters I/B/E/S. Oracle's second-quarter net income fell to $2.2 billion, or 51 cents per share, from $2.5 billion, or 56 cents per share, a year earlier.
This doesn’t seem to be bothering the company too much, according to what the chairman Larry Ellison said in a statement released together with the earnings release.
“We are still on-target to sell and book more than $1.5 billion of new SaaS and PaaS business this fiscal year. That is considerably more SaaS and PaaS new business than any other cloud services provider including Salesforce.com.”
According to Forbes, investors may be trained to accept Oracle’ cloud growth story for this quarter and more, but the company doesn’t have much room to lose a step as all eyes watch whether Oracle can transition its new business to converge with its old without losing too much of the total in the process.