Oracle Shares Slide After Mixed Q2 Earnings; Says No Plans to Hire Co-CEO

Oracle chairman Larry Ellision said the group has no plans to hire a co-CEO following the passing of Mark Hurd in October and held to its forecast of double-digit earnings growth for the 2020 fiscal year.
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Oracle Corp (ORCL) - Get Report shares traded lower Friday after the cloud-focused software group posted mixed second quarter earnings and said it has no plans to hire a co-CEO following the death of Mark Hurd earlier this year.

Oracle said non-GAAP earnings for the three months ending in November, the group's fiscal second quarter, came in at 90 cents per share, a 12.5% advance from last year and 2 cents ahead of the Street consensus forecast. Group revenues, Oracle said, edged modestly higher to $9.615 billion but fell just shy of analysts' estimates of a $9.65 billion tally as both license and billings disappointed.

A potentially larger issue for the group's challenge to larger rivals such as Amazon AMZN and Microsoft MSFT , however, is linked to its leadership plans following Hurd's passing in October at the age of 62.  

"I remember we announced two CEOs, the first time people thought that was a bit odd. And so now people are finding that we have one CEO is a bit odd," Oracle chairman Larry Ellison told investors on a conference call late Thursday. "So, let me make it very simple, how is our search going for the news -- for a second CEO. We don't have one. We have no plans for having a second CEO." 

"It was an unusual situation, where Mark and Safra (Catz) were an absolutely fantastic team, but we have complete confidence in our existing management team." he added. "We're doing a lot of recruiting (and) we're hiring a bunch of people at the next layer down, who are potential CEOs when both Safra and I retire - which is not anytime soon. And so, we're going to strengthen the management team, but one of the strategies for strengthening that team is not to hire a second CEO."

Oracle shares were marked 2.7% lower in early trading Friday to change hands at $54.94 each, a move that would trim its year-to-date gain to around 22.4%.

Oracle said it sees current-quarter earnings in the region of 95 cents to 97 cents per share, compared to a Street forecast of 97 cents, with revenues in the region of $9.84 billion. The group also said it still expects double-digit EPS growth for the full year.

"Estimate risks looks elevated with the business requiring a step up in the 2H:FY2020 fundamentals to reach its annual revenue acceleration and double-digit EPS growth outlook," said Oppenheimer analyst Brian Schwartz. "We believe this will be challenging to achieve given a faster license revenue deceleration in F2Q and with a tough y/y comparison looming in F4Q, after a strong performance last year."

Earlier this fall, Oracle said it plans to open around 20 more cloud data centers by the end of next year, including expansions and job additions in Seattle, San Francisco as well as Asia, Europe and Latin America, adding to the 16 it has already established. 

The moves will create another 2,000 jobs, Oracle said, but give the group a stronger foothold in the near $40 billion market for cloud computing and storage.