How Oracle’s Financials Looked in Fiscal 2015
Growth Remains Elusive for Oracle's Shareholders in Fiscal 2015
Operating performance and margins
As we noted in earlier in this series, Oracle (ORCL) reported its fiscal 4Q15 and 2015 results on June 17, 2015. The appreciation in the US dollar (UUP) and its ongoing transition from software licensing to the cloud continued to put pressure on its revenues and margins, respectively.
Using constant currency terms, all of the company’s operating segments reported positive, though minimal growth, with the exception of cloud services. Please read Will Oracle’s Transition to Cloud Impact Its Margins? for additional detail.
Oracle’s traditional software license revenues were hurt by the increased preference and shift toward the cloud. This segment’s revenues declined 17% to $3.1 billion while, in constant currency terms, it fell 10%.
In 3Q15, GAAP (generally accepted accounting principles) and non-GAAP operating income grew to $13.87 billion and $17.4 billion, respectively. The GAAP and the non-GAAP operating margin was 36% and 45%, respectively. GAAP and non-GAAP EPS (earnings per share) stood at $2.21 and $2.77, respectively. As the chart above shows, Oracle’s revenues and its margins are on a downward trend.
Oracle’s R&D and acquisition strategy
Oracle is known for using its acquisitions to fund its growth. However, since the acquisition of Datalogix in December 2014, Oracle has not acquired any other companies. On the other hand, its peers Microsoft (MSFT), IBM (IBM), and Intel (INTC) have continued to follow this acquisition strategy. Microsoft’s (MSFT) most recent acquisition is 6Wunderkinder GmbH, which it announced on June 1, 2015. Intel also announced its acquisition of Altera on June 1.
As we mentioned in Oracle’s previous earnings reviews, the company believes in spending on acquisitions as well as R&D (research and development) to expand its reach and hone its domain expertise.
In fiscal 2015, Oracle spent ~13% of its total revenue on R&D. Microsoft and SAP spend ~12%–13% of their funds on R&D. However, IBM only allocates 5%–7% of its revenue to R&D.
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