Oracle Corporation (ORCL), SAP AG (ADR) (SAP): Should You Hit the Panic Button on This Stock?

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This was one tech giant investors had a lot of hope from. Sadly, its recently announced numbers didn’t live up to expectations. What does that say about the stock’s future? Well, let’s see..

Oracle Corporation (NASDAQ:ORCL)

Oracle Corporation (NASDAQ:ORCL) announced lackluster results for the third quarter of 2013. Following the earnings release, the company’s share tumbled nearly 10%. Let’s see what happened.

That don’t impress me much

Total revenue fell 1% from last year to $9 billion. The major reason was quoted as poor sales execution. The slip was mainly due to a 4% fall in revenue from software, which contributes to approximately 74% of the total revenue. Revenue from new software license sales, along with cloud-based subscriptions, decreased 2%.

Revenues from the two segments went down to $2.3 billion for the quarter. Further, revenue from hardware also contracted 16% year on year, mainly due to weak performance by Oracle’s M Series servers.

However, Oracle’s GAAP earnings per share are up from $0.49 in the same quarter last year to $0.52 this quarter. There has been no percentage change in net income from the same quarter last year, while operating income is up 1%.

It is to be noted that had there been no strengthening of the U.S. Dollar against foreign currencies, there would have been no year on year change in Oracle Corporation (NASDAQ:ORCL)’s total revenues.

Tomorrow belongs to us

In the months to come, Oracle Corporation (NASDAQ:ORCL) plans to begin delivering new servers based on the SPARC T5 microprocessor, believed to be “the fastest microprocessor in the world.” Further, the M9 server line is soon to be replaced by an advanced M5 server. Imminent release of new products was also one of the reasons for the drop in hardware sales the last quarter, as customers postponed hardware system purchases.

To some extent, the poor sales results are also due to the European crisis, leading to a fall in demand. In fact, sale from hardware system products in Europe, Middle East & Africa declined nearly 24% as compared to the same period last year.

Slowin’ down

This wasn’t unexpected. Macroeconomic sluggishness has been a problem faced by most technology companies in recent times. Oracle Corporation (NASDAQ:ORCL)’s major competitor, International Business Machines Corp. (NYSE:IBM), also saw a similar decline in revenue from Europe, Middle East & Africa in the last quarter.

At $9.1 billion, IBM’s revenue from this region was down 5% year on year. However, IBM saw an 11% increase in revenue from Brazil, Russia, India, and China as compared to last year. This is in contrast to Oracle, which saw a decline in revenue in all geographic regions.

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