Oracle's shares slump after sales fall short of target

Constraints on IT budgets are impacting Oracle, says Ovum analyst

Software giant Oracle failed to hit its sales target for the second quarter of fiscal year 2012, resulting in a decline in its shares.

It said that its revenues had grown by two per cent to $8.8bn, but the Financial Times said this was seven per cent less than the growth expected and, as a result, Oracle's shares fell by 8 per cent in pre-market trading.

Alarmingly, its hardware systems products revenues declined by 14 per cent to $953m.

The Californian-based company was the first in the industry to release its earnings and, according to Ovum analyst Tim Wellings, its results could signal an industry-wide trend of a lack of confidence in IT spending.

"IT budget curbs have finally catch up with Oracle. Oracle's second-quarter FY2012 results missed financial analysts' consensus estimates by quite a wide margin," said Wellings.

"The constraints on enterprise IT budgets, which have been evident when talking to clients during 2011, are now catching up with Oracle, which until now has managed to buck the trend through continued development of its core database, middleware, and application product lines," he added.

Wellings went on to say that Oracle's medium and long-term prospects remained positive, but its short-term growth will resemble the wider technology sector, as enterprises are cautious about their IT investments. He said that front-office solutions are becoming more prominent in enterprises.

"There has been a shift in enterprise buying patterns, with a greater involvement for line-of-business executives, and more of a focus on industry-specific front-office solutions, rather than on generic back-end transactional solutions," he said.

Wellings explained that Oracle's recent acquisitions of RightNow, Endeca, Inquira, ATG and Fatwire will help to address the front-office solutions market, but he said that it would take time to fully integrate the capabilities available to them to create the right proposition for a more business and industry-focused enterprise audience.