Oracle Faces Investor Backlash over Cloud Revenue Reporting



Investors are furious over Oracle management’s actions

Earlier in the series, we discussed the lawsuit filed against Oracle (ORCL) by its former employee Svetlana Blackburn. This news weighed heavily on Oracle. As a result, its stock fell more than 4% after the lawsuit. This share price fall triggered angst among Oracle’s investors and shareholders.

On June 6, 2016, Grover Klarfeld, an investor in Oracle, filed a complaint against the company. Klarfeld, on behalf of Oracle shareholders, filed a complaint claiming that the company’s executives have put investors’ investments in the company at risk through their actions. Klarfeld’s complaint, which is directed towards Oracle management, says, “The defendants made materially false and misleading statements regarding the company’s business, operational and compliance policies.”

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Oracle’s stock took a beating

Oracle is reeling under the pressure of reporting top-line growth. However, despite no revenue growth in fiscal 3Q16, its cloud revenues grew 44% on a constant currency basis to $735 million. This provided relief to Oracle’s stock, which rose 4% after fiscal 3Q16 results after seeing a ~15% fall in 2015 and early 2016. To cater to investors, Oracle announced the addition of $10 billion to its current stock buyback plan in fiscal 3Q16.

Growing competition in the cloud space and lack of revenue growth has impacted Oracle stock. Amazon (AMZN), Microsoft (MSFT), IBM (IBM), and Google (GOOGL) (GOOG) collectively grew 93% and accounted for 22% of the overall cloud space in 1Q16.

Investors who want to gain exposure to Oracle can consider investing in the SPDR S&P 500 ETF (SPY). SPY has ~7% exposure to application software. It invests ~0.66% of its holdings in Oracle.


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