Oracle’s earnings for its second quarter ending in November disappointed shareholders, as speculations arise that the company’s lower sales may be a part of a broader trend that may soon impact the rest of the tech industry.
The software maker reported a net income of 54 cents per share, compared to Wall Street’s average expectation of 57 cents. And revenue also missed the mark at $8.81 billion, below the $9.23 billion analysts thought the company would generate. This definitely alarmed Oracle’s investors.
“The stock declined as much as 9.6 percent to the equivalent of $26.54 in German trading and was down 8.3 percent as of 10:40 a.m. in Frankfurt. Rival SAP AG (SAP), the biggest software maker, dropped as much as 4.1 percent to 40.78 euros.”
The rest of the market is also reacting to Oracle’s decline because it is feared this is a sign organizations are starting to cut back on IT spending. This outlook has been underscored by the fact that Oracle’s software sales did anything but reach the double-digit growth rate analysts expected, increasing only two percent compared to the same period a year ago. And Oracle’s own forecast predicts that this slowdown will persist throughout the next quarter as well.
Oracle’s software license sales and the ongoing income this business generates remain a core part of the company. They expanded this strategy into the cloud during Q2, perhaps most notably with the acquisition of customer service software maker and Salesforce competitor RightNow. Oracle agreed to pay $43.00 per share, or a total of $1.5 billion, for the company that will help it better compete with its rival.