Business Issues

Oracle Q4 profits up 10 percent, but revenue flat

Oracle’s revenue was flat year-over-year in its fourth quarter at $10.9 billion, while profits rose 10 percent to $3.8 billion, as the company reported strong growth in sales for SaaS (software as a service) subscriptions and “engineered systems” such as Exadata.

But overall hardware revenue continued to slide, falling 9 percent to $1.43 billion, according to Oracle’s announcement on Thursday.

Since buying Sun Microsystems, Oracle has continually emphasized that it is focused on higher-margin systems like Exadata, and not interested in competing with other companies in the commodity server market.

“Exadata, Exalogic, Exalytics, SPARC SuperCluster and our other engineered systems grew at a rate of 45 percent in Q4,” Oracle CEO Larry Ellison said in a statement. “We sold over 1,200 engineered systems in the quarter and over 3,000 during the year.”

Engineered systems now represent more than a third of Oracle’s hardware business, which is one of the reasons the company believes hardware will be “a growth story” in its 2014 fiscal year, Ellison added.

Meanwhile, new software licenses and cloud software subscriptions rose 1 percent to $4 billion. SaaS represents only a small portion of that total, but had a year-over-year growth rate of 50 percent, according to Oracle.

“Oracle’s HCM Cloud, CRM Cloud and ERP Cloud grew 50 percent as we added over 500 new SaaS customers in Q4 alone,” Oracle President Mark Hurd said in a statement. “Our annualized SaaS revenue run rate is over $1 billion,” Hurd added.

Software license updates and product support revenues, otherwise known as maintenance fees, grew 6 percent to $4.4 billion. Maintenance revenue is the lifeblood of software vendors, carrying hefty profit margins and ensuring that money rolls in each year even if customers aren’t buying new application licenses.

For the full fiscal 2013, Oracle posted $37.2 billion in revenue, which was also flat compared to the previous year, while net income rose 9 percent to $10.9 billion.

Oracle executives are expected to discuss the results further during a conference call Thursday.

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