Oracle Shares Plummet on Weak Q3 Earnings, Revenue Lower on Currency Movements

By Roger Baettig | March 20 2013 5:05 PM

Shares of Oracle (NASDAQ: ORCL) slumped after the close Wednesday as the company reported worse than expected earnings.

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Technology giant Oracle Corp reported that new software sales rose 7 percent from a year earlier to $2.4 billion in its fiscal third quarter ended February 29, in line with its own forecasts. (Pictured: Oracle CEO Larry Ellison.)

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Oracle reported Non-GAAP EPS of $0.65 which just slightly missed analyst estimates of $0.66 but revenue came up short of estimates by more than 4 percent.

Oracle is generally looked at as an indicator of the health of corporate spending on IT. Thus, the weak data could imply that, not only could the company be in a slight slump, but broader corporate investment could have slowed in the the quarter. This would be a drag on GDP overall.

For the fiscal third quarter, Oracle reported GAAP EPS of $0.52 and Non-GAAP EPS of $0.65. Analysts were expecting a reading of $0.66 which would have compared to the Non-GAAP figure. Revenue for the quarter was a much bigger miss as revenue was reported at $9 billion for the quarter on expectations of a reading of $9.38 billion.

Currency impacts had a lot to do with the miss of estimates. Currency losses resulted in EPS being $0.01 less than without them, which would have made Oracle report earnings in line with estimates. Revenue would have also been closer to estimates as currency movements caused revenue to be 3 percent lower than without them.

"Our non-GAAP operating margin increased to a Q3 record of 47%, and we expect it to reach an all-time high for the fiscal year," said Oracle President and CFO, Safra Catz. "Both operating cash flow and free cash flow were at record levels for a Q3, with operating cash flow of $13.7 billion over the last twelve months."

"The Oracle Cloud is the most robust and comprehensive cloud platform available with services at the infrastructure (IaaS), platform (PaaS) and application (SaaS) level," said Oracle President, Mark Hurd. "In Q3, our SaaS revenue alone grew well over 100% as lots of new customers adopted our Sales, Service, Marketing and Human Capital Management applications in the Cloud."

"This month we will begin deliveries of servers based on our new SPARC T5 microprocessor: the fastest microprocessor in the world," said Oracle CEO, Larry Ellison. "The new T5 servers can have up to eight microprocessors while our new M5 system can be configured with up to thirty-two microprocessors. The M5 runs the Oracle database 10 times faster than the M9000 it replaces."

Oracle shares fell 6.56 percent in the after-market on the news. However, shares have stabilized at these levels. Investors await the conference call with management at 5:00 pm Wednesday.