Oracle's new software, cloud revenue dropped 2 percent in Q3

Revenue from new business is important because it helps indicate future growth

Oracle's total revenue dipped 1 percent and profits remained almost flat in its most recent quarter, as revenue from new software licenses and cloud services dropped by 2 percent.

Revenue for the December-to-February period was US$9 billion, while net profit was $2.5 billion, the company said Wednesday.

"We're not at all pleased with our revenue this quarter," said Safra Catz, Oracle's chief financial officer, in a call with analysts.

The 2 percent drop in new software licensing and cloud software subscriptions pushed revenue in that business sector to $2.3 billion.

The amount of money Oracle makes from new licensing is watched closely because it helps indicate future growth. New licensing agreements and subscriptions usually lead to ongoing sales and support contracts that are lucrative for the company.

The license update and support business was almost twice the size of new business in the quarter. It saw revenue of $4.3 billion, up 7 percent on the same period in 2012.

Offsetting the healthy jump in support revenue, Oracle said its hardware products business suffered a 23 percent drop in revenue while its hardware support business fell 6 percent.

"Clearly, our customers know the new products are coming out next week and have held off for that," said Catz, referring to a new line of servers Oracle plans to formally launch next week.

The computers are based on its new Sparc T5 processor.

"The new T5 servers can have up to eight microprocessors, while our new M5 system can be configured with up to thirty-two microprocessors. The M5 runs the Oracle database 10 times faster than the M9000 it replaces," the company said in a statement.

Larry Ellison, Oracle's CEO, said the company is planning to publish "17 world-record benchmarks" for the new chip.

The launch will complete an update of the Sparc product line that Oracle began when it acquired Sun, Ellison said.

The new machines aren't expected to bring an immediate benefit to Oracle's revenue because it will take the better part of the quarter for customers to evaluate the computers, Ellison said.

"We think Q4 will be better than Q3, but we expect the turnaround to begin in Q1," he said.

The new computers are setting Oracle up for a good year in hardware, according to the chief executive.

"Next year will be a big growth year for our hardware business," he said.

Looking ahead, Oracle said it expects total revenue for the March-to-May quarter to range between growth of 4 percent and a drop of 1 percent.

Copyright © 2013 IDG Communications, Inc.

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