Software giant Oracle Corp. (NYSE: ORCL – $47.39), which is in the midst of a major transition from selling in-house application software to cloud-based services, reported adjusted earnings of $0.80 per share in the fiscal second quarter compared to $0.70 last year and two cents ahead of analysts’ consensus estimates. Revenue of $9.56 billion was down from $9.63 billion a year ago, but also a bit better than Street views of $9.52 billion. The revenue decline centers on the company’s renewed focus on cloud, which reduces licensed software sales. Cloud services and support revenue, ORCL’s largest business segment, rose to a stronger-than-projected $6.64 billion in the quarter. Oracle changed how it reports its quarterly financial results this year, mixing its cloud-computing business, which had been growing more slowly than that of competitors, with its licensing-support business. The change makes it harder to track performance of the cloud business as well as comparing earlier period results.
The server-to-cloud database transition is a long-term game, but Oracle should have a large degree of success here, given is longstanding customer relationships and the price/performance its systems offer. Bolt-on acquisitions are still a possibility with the company’s $60 billion cash hoard. Meanwhile, revenue, net income and cash flow will continue to advance moderately over time, with per-share figures benefiting from stock purchases. With full-year fiscal 2019 per share earnings projected at $3.40, the shares are reasonably priced at 14 times and the well covered dividend yields 1.7%.