Oracle Corporation (NASDAQ:ORCL) founder chairman said during the company’s quarterly earnings report call yesterday that the turnaround of its hardware division is unlikely to happen before the first quarter of 2014; the business will begin showing solid growth only next year.
Earlier, Oracle CEO Larry Ellison said that the company’s hardware business will start growing by the third or fourth quarter of FY-13.
The software giant’s third quarter earnings fell short of Wall Street’s expectations. The company earned 65 cents per share on revenues of $8.97 billion. Analysts were expecting $9.37 billion sales with 66 cents in earnings. Revenues from cloud software subscription and new software licenses declined 2 percent to $2.3 billion.
However, product support and software license updates generated $4.3 billion in revenues, an increase of 7 percent from the same period a year ago. Revenues from the hardware product systems declined 23 percent from $869 million to $671 million.
Oracle Corporation (NASDAQ:ORCL) acquired Sun Microsystems Inc. in January 2010 for $7.4 billion. Ever since, investors have been hoping for a turnaround of business, but revenues continue to shrink. Many analysts call it the worst acquisition by Oracle. By purchasing Sun Microsystems, Oracle became a direct competitor of its long-time partner Hewlett-Packard Company (NYSE:HPQ). Later, HP sued the company after Oracle stopped making the database software for Hewlett-Packard’s Itanium servers. HP wants Oracle to pay it $4 billion in damages.
But Ellison has always defended the acquisition, saying that Sun Microsystems has proved to be the most profitable purchase by Oracle Corporation (NASDAQ:ORCL). Talking about the declining revenues, Ellison says it was fully planned because Oracle is trying to eliminate Sun’s low margin products to focus on the profitable products which combine hardware and software. And he had promised investors that everything will be in place by February 2013, and revenues will stop declining.
Oracle Corporation (NASDAQ:ORCL) shares were down 9.73 percent to $32.28 at the close of the market.