Oracle Reports Another Miss On Earnings And Says CEO Larry Ellison Is Stepping Down

$0.62 EPS versus expectations of $0.64.

Revenue of $8.06 billion versus expectations of $8.77 billion.

And it just shocked to the world by reporting that co-founder Larry Ellison is stepping down as CEO.

He was the longest sitting CEO in Silicon Valley and gave no indications that he had planned to retire anytime soon.

Oracle will hand the role over to a pair of executives: Safra Catz, formerly a president and CFO will be co-CEO. Mark Hurd, also a president, is now the co-CEO. Ellison will be on the board as executive chairman and he's taking on the title of CTO.

Analysts were expecting a modest increase in both revenue and profit. Their expectations of $8.77 billion in revenue and $.64 earnings per share profit compares to $8.38 billion in revenue and $.59 EPS for the year ago quarter.

In its last fiscal year, Oracle steadily grew revenues and profits, but mostly disappointed Wall Street by not growing as them as much as Street wanted. The last time it reported earnings was for its fourth quarter, 2014, usually its best quarter as salespeople push to close deals to make their annual quotas. But for the second year in a row, it missed expectations. A fourth quarter miss would have unheard of just a few years ago.

However, Oracle says that, like it's competitors, it is overhauling itself to sell more of its software as a cloud service, on a subscription basis. When its customers buy software through the cloud, instead of license it and install it on their own computers, they pay less up front and more over time. Oracle told analysts that this will affect its revenue in the short term.

Therefore, Wall Street is looking for a progress report on Oracle's cloud sales. It's also looking for solid sales of Oracle's bread-and-butter product, the database, as well as good news from Oracle's hardware business, which, after a long, harsh decline, recently started growing again.

Here's the press release:

REDWOOD SHORES, Calif., September 18, 2014 -- Oracle Corporation (NYSE: ORCL) today announced that fiscal 2015 Q1 total revenues were up 3% to $8.6 billion. Total Software plus Cloud revenue was up 6% to $6.6 billion. Software-as-a-service (SaaS) and Platform-as-a-service (PaaS) cloud revenue was up 32% to $337 million. Infrastructure-as-a-service (IaaS) cloud revenue was up 26% to $138 million. Hardware systems revenue was down 8% to $1.2 billion. GAAP operating income was up 3% to $3.0 billion, and the GAAP operating margin was 34%. Non-GAAP operating income was up 2% to $3.8 billion, and the non-GAAP operating margin was 44%. GAAP net income was unchanged at $2.2 billion while non-GAAP net income was up 2% at $2.8 billion. GAAP earnings per share were $0.48, up 2% compared to last year while non-GAAP earnings per share were $0.62, up 4%. GAAP operating cash flow on a trailing twelve-month basis was $15.4 billion.

"We are increasing our cloud services growth rate while simultaneously delivering record levels of cash flow," said Oracle CEO, Safra Catz. "In Q1, our overall cloud services business grew more than 30% to $475 million in revenue. At the same time, we delivered an all-time record operating cash flow up 7% to $6.7 billion. We are laser focused on two goals: growing our cloud business and growing our cash flow. We're off to a good start in FY15."

"Our internally developed Fusion cloud applications business grew at a rate of nearly 200% in the quarter," said Oracle CEO, Mark Hurd. "As our hyper-growth Fusion applications become a larger and larger portion of our total SaaS sales, that will drive up our overall cloud services growth rate. Our cloud business is already three times the size of Workday, but we won't be satisfied until we're number one in the cloud."

"Next week at Oracle Open World, we will be rolling out our database cloud service," said Oracle Executive Chairman and Chief Technology Officer, Larry Ellison. "Database is our largest software business, and database will be our largest cloud service. With our new multitenant Database as a Service offering, our customers and ISV's can move any of their existing Oracle databases and applications to the Oracle Cloud with the push of a button."

The Board of Directors also declared a quarterly cash dividend of $0.12 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on October 8, 2014, with a payment date of October 29, 2014.

Oracle also announced that its Board of Directors authorized the repurchase of up to an additional $13.0 billion of common stock under its existing share repurchase program in future quarters.