Enterprise software vendor Oracle said its second quarter revenues rose 2 percent to $9.3 billion and net income decreased 1 percent to $2.6 billion.
The growth in the second quarter was not expected because Oracle faces competition from smaller, aggressive companies like Salesforce.com and Workday which have been offering cost effective software and Internet-based products at prices that often undercut Oracle.
To compete with smaller rivals, the four-decade old company has been rolling out its own cloud-based products while President Mark Hurd has hired new sales people and created sales teams aimed at going after specific cloud competitors.
“That’s all they think about every day, is competing against every Workday prospect,” said Oracle CEO Larry Ellison on a conference call with analysts. “We have another team of people that compete against Salesforce.”
According to market research firm IDC, next year may be tough for companies selling IT equipment to governments and companies. Global spending on servers, storage and enterprise networks is likely to grow 4 percent next year, after increasing 1 percent in 2013.
Oracle plans to compete aggressively against rivals offering cloud-based technology infrastructure services, like Amazon.com and Rackspace. “We’re going to be cost competitive and price competitive at the infrastructure level while being highly differentiated at both the platform level and the application level,” Ellison said.
The outlook for the third quarter is also promising. Oracle Chief Financial Officer Safra Catz said that current-quarter revenue would grow between 3 percent and 7 percent in constant dollars, equivalent to between $9.2 billion and $9.6 billion.
Oracle President and CFO Safra Catz said the growth in revenue was driven by 5 percent increase in software revenue.
Its hardware business, including support, grew 2 percent driven by double-digit revenue growth in Exadata, Exalogic and Exalytics.
The No. 2 software said SaaS business posted bookings growth of 35 percent in the second quarter.
Oracle CEO Larry Ellison said its fastest growing cloud services were Fusion Human Capital Management and Fusion Salesforce Automation, each growing bookings at a triple-digit rate.
The company said new software licenses and cloud software subscriptions revenues were unchanged at $2.4 billion.
Software license updates and product support revenues rose 6 percent to $4.5 billion.
Hardware Systems revenues, including hardware systems products and hardware systems support, were unchanged at $1.3 billion.
Hardware systems products revenues decreased 3 percent to $714 million.
Software license and cloud software subscription revenue grew 1 percent over the 18 percent growth reported last year.
For the current quarter, new software and sales and subscriptions will grow between 2 percent and 12 percent.
For the current quarter, hardware product revenue will be in a range between down 1 percent and up 9 percent.