Oracle Corp's (NYSE:ORCL) sales fell more than expected in the first quarter, hurt by a strong dollar and as the rapid shift by customers to lower-margin cloud-based software failed to make up for waning sales of traditional packaged software.
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Like its rivals such as SAP <SAPG.DE>, IBM Corp (NYSE:IBM) and Microsoft Corp (NASDAQ:MSFT), Oracle is striving to boost Internet-based software sales to head off fast-growing competitors such as Salesforce.com Inc (NYSE:CRM) and Workday Inc (NYSE:WDAY).
Oracles's revenue declined 1.7 percent to $8.45 billion in the first quarter ended Aug. 31. However, that was less than the 5.4 percent decline in the previous quarter.
Analysts on average were expecting revenue of $8.53 billion in the latest quarter, according to Thomson Reuters I/B/E/S.
Sales of Oracle's cloud-computing software and platform service rose 34 percent to $451 million in the quarter. Sales of traditional software licenses fell 16 percent to $1.51 billion.
Wall Street analysts was expecting cloud-based sales to increase 35 percent and traditional software sales to fall 17 percent, according to RBC Capital Markets.
While Oracle has had success with its cloud model, analysts have said the company has not been moving fast enough to make up for declines in its traditional software sales.
Cloud-based software sales account for a small portion of Oracles' total revenue as they are subscription based, which promise a steady stream of revenue but with lower margins.
The strong dollar also ate into Oracle's sales in the latest quarter. The company said sales increased 7 percent on a constant currency basis.
Oracle's net income fell to $1.75 billion, or 40 cents per share, from $2.18 billion, or 48 cents per share. Excluding items, it earned 53 cents per share.
The company's shares were marginally lower at $38.25 in extended trading, compared with their close of $38.27 in regular trading on Wednesday.
(Reporting by Abhirup Roy in Bengaluru; Editing by Savio D'Souza)