Oracle Corporation (NYSE/ORCL) shares are falling after the company posted a larger-than-expected drop in sales, signaling the company is struggling to adapt to the changing technology landscape.
On Wednesday, June 17, Oracle reported its fourth-quarter earnings and revenues that fell short of Wall Street’s expectations. According to consensus estimates from Thomson Reuters, Wall Street expected Oracle to deliver fourth-quarter earnings of 86 cents per share on $10.92 billion in revenue. However, the company reported adjusted earnings of 78 cents on revenue of $10.71 billion. (Source: Oracle Corporation, June 17, 2015.)
Investors were disappointed by the results. After the report was released, shares of the technology giant dropped six percent to $41.91 in after-hours trading.
Strong U.S. Dollar is Hurting the Multinational Corporation
Oracle claimed that its quarterly results were “significantly impacted by the strengthening of the U.S. dollar compared to foreign currencies.” The company said its total fourth-quarter revenues, which were down about five percent, would have actually seen a three percent increase if not for the stronger dollar.
The U.S. dollar has risen significantly against other major currencies over the last few months. This already has and will continue to negatively affect U.S.-based companies with global operations.
As the U.S. dollar increases in value, companies that do business outside of the U.S. will have to convert their revenues into the greenback, which will now have less value than it used to.
However, even after accounting for the strong dollar, Oracle’s results were weak. Like many firms that were hugely successful in a prior era of technology, the company is trying to reinvent to a new business landscape. Oracle’s financial struggles this past quarter show just how tough it has been for the firm to remain relevant.
Can Oracle Turn Things Around?
Analysts are closely monitoring a transition in the company due to their latest shift in strategy. Co-CEO Mark Hurd recently said Oracle intends to make about 95% of its services available over the Internet by mid-October; this compares to roughly 65% of Oracle’s products being on the cloud today. For the company to regain its growth mojo, hitting this target is critical.