The last thing the tech market needed right now was a disappointing set of earnings from Oracle Corporation (NASDAQ:ORCL), but unfortunately that is exactly what it got. It would be an understatement to say that it has been a difficult 2013 so far for the tech industry and these numbers will do little to assuage many fears. But what do they mean for Oracle and how do they relate to the rest of the tech world?
Oracle disappoints, again
Clearly the numbers came in towards the bottom of the guidance ranges. All of which is somewhat disappointing given that many investors have been hoping for a second quarter (2Q) bounce back. Last time around Oracle Corporation (NASDAQ:ORCL) blamed some sales execution issues and the timing of the sequester. However it calmed investors by describing its pipeline as being up and, claimed that the issue was really about the timing and execution of deal closure.
Well it was a different story this time around with sales execution quoted as improving ‘significantly’ and economic weakness cited in a few areas like Brazil, China and Australia. Moreover, transaction sizes were described as being smaller (a sign of economic pressure).
The good news from a geographic perspective was that its US and EMEA performance were as expected with 4% and 5% new license growth respectively. The problem was with Asia-Pacific down 7%. This is a worrying sign for the industry because many technology companies are relying on Asia for growth.
What the industry is saying
As a bellwether Oracle Corporation (NASDAQ:ORCL)’s results will be closely watched and those of us hoping for some sort of confirmation of a return to better days would have been disappointed. In a sense it is a mere continuation of what we have been seeing elsewhere. For example, Palo Alto Networks Inc (NYSE:PANW) recently reported results. It missed estimates and guided lower than the market consensus for the next quarter. Although Palo Alto Networks Inc (NYSE:PANW) is in a different area (IT security), I found its results interesting because other companies in the sector had previously reported weakness in April. Unfortunately Palo Alto came out and confirmed that conditions in May were only ‘in line’ with the reduced expectations created by a weak April. Another indication of weakness and it appears to be linear.
One interesting aspect of Palo Alto is that its telco service provider revenues do not make up a significant part of its revenues. This is in contrast with other tech companies like say F5 Networks, Inc. (NASDAQ:FFIV) and Fortinet Inc (NASDAQ:FTNT). These companies missed estimates and disappointed with guidance. Both cited weakness in their service provider verticals and this may well continue into the current quarter. On the other hand Palo Alto’s results are more indicative of the wider tech spending environment and investors will need to hear some more positive noises from bellwethers like IBM and Oracle Corporation (NASDAQ:ORCL) before feeling very confident with Palo Alto.
