Stronger Dollar Could Slow Oracle's Growth

SAN FRANCISCO - A stronger dollar could trim Oracle's(ORCL Quote) growth during the coming quarter.

On the upside, Oracle's big improvement in operating margins should provide a buffer against slower revenue growth going forward.

On Thursday, Oracle reported year-over-year revenue growth of 18% to $5.42 billion for the first fiscal quarter ended in August.

The Redwood Shores, Calif. company's operating margin, excluding special charges, rose 350 basis points year over year to 40.1%.

That should provide a cushion against the recent strengthening of the dollar. President Safra Catz projected that today's currency exchange rates could take 3 percentage points off the top of revenue growth in the second quarter.

Oracle projected second-quarter top line growth of 12% to 15% in constant currency, implying revenue of $6.01 billion to $6.17 billion, excluding special items.

But factoring in the impact of a stronger dollar, growth could slip to 9% to 12%, implying revenue of $5.85 billion to $6.01 billion. Analysts were expecting revenue of $6.23 billion, according to Thomson Reuters.

Gartner analyst Kenneth Chin says he's concerned about the impact a stronger dollar will have on Oracle's future. "If the dollar strengthens a lot more, they could potentially get hit harder on foreign exchange," he says.

And with the turmoil in the financial markets, Oracle's deal-closure cycles will likely lengthen, creating more fluctuation in new-license revenue from quarter to quarter, Chin predicts.

Meeting revenue expectations "will be more challenging because deals will take longer to close and potentially be deferred," Chin says. Gartner expects deal closure cycles to lengthen across the entire tech sector.