(Bloomberg) -- Oracle Corp. reported fiscal third- quarter sales and profit that fell short of analysts’ estimates as the software maker faced stiffer competition from Salesforce.com Inc. and rivals selling Internet-based programs.

Revenue in the period that ended Feb. 28 was $9.31 billion, and profit before certain costs was 68 cents a share, Oracle said yesterday in a statement. On average, analysts projected $9.36 billion in sales and profit of 70 cents, according to data compiled by Bloomberg.

License and cloud-subscription revenue missed estimates, and Oracle is facing higher costs to build its cloud business, said Daniel Ives, an analyst at FBR Capital Markets. After spending $50 billion to acquire about 100 companies in the past decade, Chief Executive Officer Larry Ellison is working to jump-start growth by remaking Oracle into a provider of the software and gear clients need to shift to Web-based computing.

“They were late to the cloud,” said Ives, who has the equivalent of a buy rating on the stock. “It was a sloppy quarter but it feels like they are slowly starting to take this boat in the right direction.”

The shares of Redwood City, California-based Oracle fell as much as 3.7 percent to $37.40 today. The stock rose 15 percent last year, compared with a 30 percent increase in the Standard & Poor’s 500 Index.


Fourth Quarter


For the current quarter, which ends in May, Oracle Chief Financial Officer Safra Catz gave forecasts for sales and profit that were in line with analysts’ estimates. Before some costs, profit will be 92 cents to 99 cents a share, and sales will rise 3 percent to 7 percent, Catz said yesterday on a conference call. Analysts polled by Bloomberg on average predicted profit of 96 cents and a revenue gain of 5 percent, to $11.5 billion.

The cloud-computing business may be starting to hit its stride, even as the traditional software business holds back growth in broader revenue, Ives said.

“Investors will sleep a lot better with that guidance number,” he said.

Fourth-quarter sales of hardware products are forecast to be unchanged or post an increase of as much as 10 percent, and the company gave the same projection for new software license and cloud revenue.

Third-quarter net income rose 2.4 percent to $2.57 billion, or 56 cents a share. New software-license and cloud-subscription sales, a closely watched indicator of future revenue, rose 3.6 percent to $2.42 billion, the company said. Hardware-product sales rose 8 percent to $725 million during the quarter.


Sales Growth


Oracle, the world’s largest maker of database software, hasn’t posted sales growth of more than 5 percent in 10 quarters. The company is the second-largest maker of business applications, behind SAP AG, and it entered the computer-server market with the 2010 acquisition of Sun Microsystems.

The company is under pressure in its three main businesses, said Brent Thill, an analyst at UBS AG in San Francisco who recommends buying the stock. Microsoft Corp. has gained ground in database software, along with newer companies such as MongoDB Inc. and Couchbase Inc. that are chipping away at more established providers. Other customers are leaving Oracle because they’re putting data in the cloud with vendors like Amazon.com Inc.

“Oracle has been blaming internal execution, and at some point you have to say they are definitely losing market share,” Thill said. “In database we think Microsoft is picking up share, and on the applications side, SAP is still a tough competitor and people are moving to cloud-based competitors.”


Salesforce, Workday


In business applications, programs that handle tasks like finance, client management and human resources, customers are defecting to cloud-based suppliers like Salesforce.com and Workday Inc. In hardware, Oracle has “missed more quarters than they’ve made,” Thill said.

Some of the company’s issues have stabilized and Oracle should be able to restore stronger growth going forward, Thill said. Ellison has gotten more involved in the cloud strategy, which is a plus, he said.

In September, Oracle enhanced its database software to take greater advantage of large amounts of computer memory to speed data analysis and online commerce. Oracle and Salesforce.com struck a partnership in June, agreeing to use more of each other’s products and have their applications share some data.



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