First day of Hurd'n'Catz at Oracle: It's dis-fur-pointing for Wall St

Oracle posted results that missed analysts' expectations yet again on Thursday, in a Q1 2015 earnings report that was all but overshadowed by the unexpected news that Larry Ellison has stepped down as CEO.

Revenues for the quarter were $8.60bn, a scant 2.68 per cent gain over the same period a year ago and below even the lowest guesses of the 31 Wall Street worthies polled by Yahoo! Finance.

The database giant's earnings disappointed, too, coming in at just $0.62 per diluted share – which, while up 4 per cent from the year-ago quarter, was below the $0.64 per share that analysts were expecting to see.

Likewise, Oracle's net income for the quarter was flat, year-over-year, at $2.18bn.

The reasons for the lackluster performance were the usual suspects. Oracle's hardware business is struggling, its core on-premise software business isn't growing as fast as it should, and the company isn't making enough headway in cloud computing to make up for the slump.

That didn't stop newly minted CEOs Safra Catz and Mark Hurd from talking up Oracle's cloud biz in a conference call with financial analysts on Thursday. The company saw revenues from its cloud IaaS business grow by 26 per cent, year-over-year, Catz said, and cloud SaaS and PaaS revenues were up 33 per cent.

Core software, hardware, and services shaky

The trouble is, those businesses only accounted for $138m and $337m in revenues during the first quarter, respectively. Combined, they only made up 5.5 per cent of Oracle's total sales. Meanwhile, Oracle's core software, hardware, and services businesses still look shaky.

Revenues from software license renewals and support were up 6.77 per cent to $4.73bn, which was encouraging. But revenues from new software licenses – perhaps a more telling figure – were $1.37bn, down 2.07 per cent from last year's quarter. Total software and cloud sales were $6.58bn, a 6.18 per cent increase.

After experiencing some growth in the previous sequential quarter, Oracle's hardware business was flailing again in Q1, with total hardware revenues down 7.61 per cent, to $1.17bn. Revenues from hardware support were flat at $587m, but new hardware sales were just $578m, a 13.60 per cent decline from the year-ago quarter and a 33.56 per cent decline sequentially.

Oracle's services organization, too, saw its revenues decline by 6.86 per cent, year-over-year, with total sales of $855m.

And while the first quarter is traditionally a weaker one for the database giant, these results were no anomaly. Rather, they represent a trend that has persisted for several sequential quarters, as customers increasingly move from an on-premise IT model to the cloud. Little wonder, then, that Oracle is going all-in on its efforts to become the industry's biggest cloud provider.

"As movement to the cloud grows, we expect this trend to impact our revenue – to the positive," Catz said during the call.

Oracle's erstwhile-CEO-turned-CTO-and-executive-chairman Larry Ellison added that the company is looking to grow its IaaS, PaaS, and SaaS businesses by double digits over the next few successive quarters, with targets as high as 50 per cent growth or more.

When one analyst asked Hurd whether his appointment as CEO would have any other effects on the structure or operation of Oracle's sales organization, Hurd replied simply, "No." ®