Oracle profits rise but investors less impressed

Net income up two per cent to $2.6bn in Q3 with cloud, licences, support and hardware all up

Cloud software and subscriptions drove Oracle to new heights in Q3, helped along slightly by increased sales of its hardware systems, software licences, and support.

Fiscal results released to the New York Stock Exchange include a 24 per cent boost to cloud subscription revenues that helped push total quarterly turnover four per cent higher to $9.3bn (£5.6bn) - and net income two per cent to tip $2.6bn.

Mark Hurd, president of Oracle, confirmed that cloud application bookings expanded by about 60 per cent in Q3 of its 2014 year.

"Our quarterly cloud application revenue is now approaching $300m. All of our strategic cloud application suites, including Fusion Enterprise Resource Planning, Fusion Human Capital Management and Fusion Customer Experience posted triple-digit revenue growth," he said.

Against a strengthening greenback, new software licences and cloud software subscriptions revenues were up four per cent to $2.4bn, software licence updates and product support revenues up five per cent to $4.6bn, and hardware systems products revenues eight per cent to $725m.

Larry Ellison (pictured), chief executive of the California-headquartered company, said its engineered server systems, including Exadata and SPARC SuperClusters, expanded 30 per cent in constant currency terms, although traditional high-end server lines are in decline.

"Our engineered systems business is growing rapidly for the same fundamental reason that our cloud applications business is growing rapidly. In both cases, customers want us to integrate the hardware and software and make it work together, so they don't have to," Ellison claimed.

However, despite the apparently pleasing report, investers seemed unimpressed so far. Oracle shares held steady at $38.84 on the NYSE yesterday, Tuesday 18 March 2014, slightly down from its 52-week high of $39.85 per share.

The company barely met its forecast that new software sales and subscriptions would increase by two to 12 per cent in Q3. Furthermore, according to a report by Reuters, investers continue to expect some softness in the IT industry this year.

Hardware growth is nice to have, noted the newswire, but long-term profits from new software subscriptions and maintenance contracts are better predictors of future performance.