Wall Street Beat: Despite Oracle earnings miss, software appears healthy

Adobe blows away expectations, Tibco banks on Big Data, and there's more good news for the smartphone market

An earnings miss by Oracle is usually enough to send tech market forecasters back to their spreadsheets with furrowed brows. But despite the enterprise software giant's weaker-than-expected financials, there was enough good news on the tech sales front this week to keep expectations for IT on the optimistic side.

Oracle's on-premises software license revenue declined in the company's fourth quarter ending May 31, leading to a 4 percent year-over-year dip in net income, to US$3.65 billion. Revenue edged up a paltry 3 percent, to $11.3 billion.

While SaaS (software-as-a-service) and PaaS (platform-as-a-service) revenue rose 25 percent to $322 million and IaaS (infrastructure-as-a-service) sales increased 13 percent to $128 million, those numbers were a little lower than analysts' high expectations for the company. Oracle has had success in the cloud-related enterprise market and CEO Larry Ellison claimed in the earnings announcement that it is now the second-largest SaaS company in the world, behind Salesforce.

The company seems to have enough momentum to keep the earnings drop from worrying market watchers too much. The quarter was a "modest disappointment," according to a research note from Deutsche Bank. But the investment company said Oracle is getting enough traction with its cloud software to warrant a "buy" rating on the stock. The bottom line, according to Deutsche Bank, is that the quarter was not a "thesis changer" for Oracle.

The story is similar for Tibco, the maker of middleware and business intelligence software. The company Thursday said that revenue for the quarter ending in May increased 3 percent year over year to $252.3 million, while net income dropped to $1.6 million from $8.7 million.

The company has had some trouble with sales execution recently. Still, on a pro-forma basis, excluding one-time items and certain accounting changes, earnings per share of $0.14 beat expectations of analysts polled by Thomson Reuters by $0.01, and sales beat estimates by almost $2 million.

There is still underlying confidence in the company's software lineup, geared to help businesses analyze the flood of real-time data pouring in from customers hooked up to all sorts of computing devices, including smartphones. "We feel it is poised for EPS growth in the comping year" said TheStreet Ratings Team in a post after the earnings announcement.

"We see a large and growing opportunity ahead of us in big data, where our technologies can integrate both static and real-time data sources to enable fast data solutions," said Tibco CEO Vivek Ranadivé in a statement. "These are systems that companies use to create more responsive and customized digital experiences for their customers, fostering greater loyalty and unlocking new avenues for revenue generation."

Earlier in the week, Adobe blew away expectations, posting a quarterly jump in profit, to $88.5 million from $76.5 million a year earlier, while revenue rose slightly to $1.07 billion from $1.01 billion. Excluding one-time items, the company's EPS was $0.23, compared to analyst expectations of $0.07.

Here again, cloud was the key. For example, Adobe Marketing Cloud quarterly revenue was $283 million, up 23 percent year over year, the company said.

"Our earnings performance in Q2 reflects the financial leverage we have in our model," said CFO Mark Garrett in a statement. "With Adobe's Creative Cloud transformation behind us, our focus moving forward is to drive strong revenue and earnings growth with our market-leading cloud offerings."

There was also good news from IDC on the smartphone front this week -- a good thing, since overall IT sales growth is expected to be fueled by smartphones as tablet sales flatten out and the PC market sinks.

IDC said its recent surveys show that smartphones will drive double-digit growth of what it calls "smart connected devices" this year and for the next few years. The smart connected devices category includes mobile phones, tablets and PCs connected to the Internet.

IDC is forecasting the number of worldwide smart connected devices to grow 15.6 percent year over year in 2014, reaching close to 1.8 billion devices.

Even BlackBerry had some good news this week. Quarterly revenue for the financially ailing company plunged 69 percent year over year to $966 million, but it managed to eke out a profit of $23 million compared to a loss of $84 million a year earlier.

Without certain accounting changes that affected the tax hit on earnings, the company would have reported a loss. But BlackBerry CEO John Chen in a conference call stressed the positive, noting that the company's EZ Pass Program in just a few months fueled the issuance of 1.2 million licenses for BlackBerry Enterprise Server 10. The company may yet have a life as a smaller version of its old self, as Chen insisted that it will return to annual profitability in its 2016 fiscal year.

Despite mixed earnings results so far this year, there has been enough good news on the enterprise software and mobile front for market watchers to maintain guarded optimism, as tech company shares to date are up about 8 percent on the Nasdaq Computer Index.

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Marc Ferranti

IDG News Service
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