Key Takeaways
- The Estimize consensus is calling for earnings per share of 62 cents on $9.18 billion in revenue, 1 cent higher than Wall Street on the bottom line and $50 million on the top
- After a long back and forth with investors, Larry Ellison got his way and closed the deal to purchase Netsuite for $9.2 billion
- Strong growth in SaaS and PaaS will help offset weakness in Oracle’s legacy licensing business
Oracle (NYSE:ORCL) is scheduled to report its fiscal second quarter earnings today after the closing bell. The tech giant is typically one of the earlier reports in the season that doesn’t officially kick off until Alcoa’s report on January 9. Oracle is coming off a weak first quarter, failing to meet analysts estimates on both the top and bottom line. The expected rollout of new products and the integration of Netsuite should help reverse the persisting weakness over the past few quarters.
Analysts aren’t optimistic that Oracle’s strategic initiatives will pay off this quarter. The Estimize consensus is calling for earnings per share of 62 cents, down 2% from a year earlier. That estimate has ratcheted down 8% likely in response to the Netsuite deal valued at $9.2 billion. Revenue for the period is forecasted to jump 2% to $9.17 billion, reflecting the progress being made in shifting to a subscription based model.
Oracle’s transition to cloud computing in its Saas, PaaS and Big Data divisions has been encouraging. While the company enjoys a leading position in enterprise and database management systems, they are also gaining ground in the rapidly growing cloud sector. New products and the acquisition of NetSuite should help capture greater market share in spite of falling licensing revenue. Further strategic acquisitions will also play a significant role in expanding the company’s product portfolio.
Most of the upside this quarter will come from sales growth in SaaS and PaaS services which management predicts will climb 78% to 82%. Revenue from software, cloud (includes SaaS and PaaS) net software licenses and software supports is forecasted in the range of 3% to 5%.
Despite a dedicated focus on cloud computing, it won’t be all smoothing sailing. The software provider is operating in a top heavy industry, facing competition from the likes of Google, Salesforce and Amazon.
