Oracle posted a fourth quarter result which missed market expectations on Thursday. Investors dumped the tech giant’s stock on the news with the share price falling almost nine percent.
Net income for the quarter was US$3.65 billion, down four percent on US$3.8 billion in the same quarter a year ago.
While Oracle didn’t drop the ball in any department, the result shows younger, nimbler competitors are squeezing the company on several fronts.
Keep calm statement from the bosses
Oracle’s management moved to calm investors with a prepared statement talking of the company’s relatively successful move to subscription-based sales. It mentioned strong growth in software-as-a-service which is up 25 percent and growth in infrastructure-as-a-service.
The statement quotes CEO Larry Ellison saying: “Oracle is now the second largest SaaS company in the world. In SaaS, we’re in front of everybody but salesforce.com. In IaaS we’re larger and more profitable than Rackspace.”
While the company is doing fine in these new business areas, they are small compared to Oracle’s core business which appears stagnant. Like other old school technology companies, Oracle‘s challenge is that the new growth areas have margins far lower than in its traditional business. The company has yet to refine its business model to cope with that shift.