Oracle blames sales force for third-quarter miss, stock drops

SAN FRANCISCO (REUTERS) - Oracle blamed its rapidly expanding sales force for a severe miss in third-quarter software sales and warned that its ailing hardware business will lose more ground this quarter, driving its shares 8 per cent lower on Wednesday.

The world's No. 3 software maker projected a 1 per cent to 11 per cent rise in new software licences and Internet-based subscriptions in the May quarter, an indicator of future performance. But investors focused on a 2 per cent slip in the February quarter that badly missed Wall Street's targets.

Oracle's February quarter revenue miss, which executives blamed poor sales-force performance, was its worst since the November quarter of 2011.

"What we really saw was the lack of urgency we sometimes see in the sales force, as Q3 deals fall into Q4," chief financial officer Safra Catz told analysts on a conference call. "Since we've been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps as they ran out of runway in Q3."

Wall Street remains concerned about tepid spending by governments and corporations in an uncertain global environment, but Ms Catz dismissed those fears.

Oracle is also struggling with its hardware division and facing greater competition in cloud or Internet-based software from the likes of IBM and SAP and nimbler rivals like Salesforce and Workday.

Oppenheimer analyst Brian Schwartz said Oracle's May-quarter software sales projection was in line with expectations.

"That's probably a little hint that they've gotten off to a good start in Q4, that some of those deals that slipped in Q3 likely closed in Q4," he said.

Revenue from Oracle's hardware division, which it acquired through the US$5.6 billion (S$7.05 billion) purchase of Sun Microsystems in 2010, fell to US$671 million from US$869 million in the year-ago quarter. The division's revenue has fallen every quarter since it closed the Sun deal, and chief executive Larry Ellison had said in December he expected hardware systems revenue to start growing in the fiscal fourth quarter.

Overall, Oracle's revenue dipped 1 per cent to US$9 billion, missing the US$9.382 billion analysts had expected on average.