Oracle Earnings Rise, But Software Sales Miss Forecasts

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Justin Sullivan/Getty ImagesOracle Corp. CEO Larry Ellison
By Noel Randewich and Jim Finkle

SAN FRANCISCO -- Oracle missed expectations for software sales and subscriptions for the second straight quarter, sending its shares plunging as investors worried CEO Larry Ellison may have trouble getting the technology giant back on track.

On Thursday, Oracle (ORCL) executives forecast that new software sales and subscriptions will rise 0 percent to 8 percent this quarter and blamed weakness in the past quarter on disappointing sales in Asia and Latin America.

Oracle, which is trying to fend off and other increasingly aggressive rivals focused on providing software over the cloud or Internet, plans to move its stock listing to the New York Stock Exchange in July from the Nasdaq, a major win for the older bourse.

Executives said the move was in shareholders' best interests, without elaborating. Oracle also said it would double its quarterly dividend to 12 cents a share.

"Organic growth is slowing and the company has a lot of pressures it has to deal with. They're late to the cloud and playing catch-up," said Mark Moerdler, an analyst at Bernstein. "Doubling the dividend - they're trying to deliver a message that their ability to deliver significantly more cash to investors is going to continue."
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Overall, Oracle's revenue stood unchanged at $10.9 billion in the period, the company's fiscal fourth quarter, ended May 31. That missed the $11.122 billion analysts had expected on average, according to Thomson Reuters I/B/E/S.

More closely watched revenue from new software sales and Internet-based software subscriptions rose 1 percent to $4 billion, short of an average forecast of about $4.2 billion, according to FBR Capital analyst Daniel Ives.

Shares of the software company fell more than 8 percent to $30.46 after hours, after closing down 2.6 percent at $33.21 on the Nasdaq.

"This is just really bad," said Kim Forrest, a senior analyst with Fort Pitt Capital Group. "I don't really trust after-hour trading to accurately reflect what the stock will do the next day. But it shows you how frustrated shareholders are right now."

Most analysts recommend buying shares of Oracle, according to StarMine Professional, with many expecting a pickup in performance as the global economy improves and corporate customers become more willing to spend on IT.

Others say the 36-year-old tech company's era of fast growth and lofty margins, when it could dictate prices because of its premier market position, may be waning.

Smaller, aggressive companies are offering competitive products at prices that often undercut Oracle, whose strategy is to integrate cloud software with its own hardware for greater efficiency.

By the Numbers

Investors scrutinize new software sales because they generate high-margin, long-term maintenance contracts and are an important indicator of future profit. The company had forecast a 1 percent to 11 percent rise in new software license and cloud subscription revenue for its fiscal fourth quarter.

Ellison blamed Oracle's performance on the poor global economic environment. "It was clearly an economic issue, not a product, competitive issue," he told analysts on a conference call.

Chief Financial Officer Safra Catz said deals Oracle missed in the fourth quarter didn't go to competitors, but instead were put off or shrank from their original sizes. She previously blamed Oracle's rapidly expanding salesforce for a severe miss in software sales in the third quarter.

Net profit for the fourth quarter rose 10 percent to $3.8 billion, or 80 cents a share. On an adjusted basis, Oracle earned 87 cents a share.

Revenue from Oracle's hardware division, which it acquired through the $5.6 billion purchase of Sun Microsystems in 2010, fell 13 percent to $849 million.

Oracle had forecast that hardware product revenue for the May quarter would fall between 12 percent and 22 percent.

The division's revenue has fallen every quarter since Oracle closed the Sun deal, but Ellison said in December he expected hardware systems revenue to start growing in the May quarter.

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Oracle Earnings Rise, But Software Sales Miss Forecasts
Company: Oracle
Cash compensation: $5.5 million
Stock and options: $90.7 million
Total compensation 1-year change: 24%

Despite his $1 salary, Ellison is not only the highest paid tech CEO this year, but the highest paid of all CEOs.
Most of Ellison's pay comes from his stock grants. In June of 2011 he was given an option to purchase 7 million shares of Oracle (ORCL) common stock.
Company: Yahoo
Cash compensation: $1.6 million
Stock and options: $35 million
Total compensation 1-year change: N/A

Mayer left Google (GOOG) to join Yahoo (YHOO) as its CEO, president and a board member in July of 2012. Her base salary was set at $1 million with an annual bonus target set at $2 million a year.
Though she only took home $6 million last year, Mayer reached No. 2 on this list because she was also offered a one-time retention award when she was hired, consisting of stock grants that could total $30 million when they vest over the next five years.
Company: eBay
Cash compensation: $4 million
Stock and options: $25.7 million
Total compensation 1-year change: 81%

The 81% jump in in Donahoe's salary this year is largely due to a one-time award of about $14.9 million paid in stock. According to a regulatory filing, Donahoe got the grant because he led eBay (EBAY) "successfully through a difficult turnaround ... and positioned it well for additional growth."
Cash compensation: $3.2 million
Stock and options: $18.9 million
Total compensation 1-year change: 25%

Benioff's base salary has been set at $1 million for the past two years. He received a $1.3 million cash bonus last year and almost $19 million in (CRM) stock options and awards. He also received $650,000 to cover costs related to his personal security, which is "of paramount importance to the company," according to a regulatory filing.
Company: AT&T
Cash compensation: $8.4 million
Stock and options: $12.6 million
Total compensation 1-year change: 12%

Stephenson, who has served as CEO and president of AT&T (T) since 2007, was paid a $6 million bonus on top of his $1.6 million base salary in 2012. About $13 million of his pay came in the form of stock and awards.
Company: Qualcomm
Cash compensation: $5.7 million
Stock and options: $15 million
Total compensation 1-year change: -5%

Jacobs was given a $3.4 million cash bonus on top of his $1.2 million salary. Other compensation for the CEO included more than $280,000 for personal use of Qualcomm's (QCOM) corporate aircraft and more than $4,000 for things such as home office costs, personal travel and entertainment.

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