Oracle Corporation (NASDAQ: ORCL) closed Thursday's trading session at $32.33. Investors question growth in Oracle's new high-speed servers that were just unveiled last Tuesday to expand its hardware business. Oracle recently announced the refresh of Sparc Servers, with the world's fastest microprocessor in the world. In the past year, the stock has hit a 52-week low of $25.33 and 52-week high of $36.43. Technical indicators for the stock are Bearish. S&P gives Oracle a neutral 3 STARS (out of 5) hold rating. Total revenues fell by 1% to $9 billion during the quarter. SPARC T5 midrange servers are based on the SPARC T5, its largest suite of hardware products since the 2010 acquisition of Sun Microsystems. John Fowler, executive vice president, Systems, Oracle stated "The new SPARC T5 and M5 systems leapfrog the competition with up to 10x the performance of the previous generation, offering an unbeatable value for midrange and high-end enterprise computing." Oracle announced the complete refresh of two existing server lines with the new servers, SPARC T5 and M5 running Oracle Solaris.
Net income for the third quarter ended February 28, 2013 at $2.5 billion, or $0.52 per diluted share, compared to $2.5 billion, or $0.49 per diluted share, for the same quarter ended February 29, 2012. Total revenues for the third quarter ended February 28, 2013 were $8.96 billion, compared to $9.04 billion for the same quarter ended February 29, 2012.
Big growth in Oracle's hardware sales have also been updated in that its real expansion won't happen until next year. Oracle's hardware revenues declined by 23 percent from the year-ago quarter, $671 million versus $869 million. Oracle shares were down more than 8%. Hardware sales slid by 23% for the period. The new T5 mid-range and M5 high-end Sparc servers are intended to improve revenues based upon the 23% sales decline.
Oracle added more than 4,000 sales reps over the last 18 months. New software licenses and cloud software subscriptions revenues were down 2% to $2.3 billion. The company missed its forecast for a gain in the 3%-13% range. Oracle stated "Total revenue in the current quarter to be down by 1% to up 4% from the same period last year." Revenue from new software licenses and cloud subscriptions is expected to be up 1%-11% for the current quarter, with earnings-per-share expected to come in the range of 85-91 cents.
Today, IBM and Oracle/Sun are the only members of this group still making their own chips. The entry-level price for the company's T5-based system is less than $500,000 per configuration, a 7x price advantage, making it least expensive in comparison to its competitors. SPARC T5 servers are the world's best platforms for enterprise computing. Oracle realizes the potential for big data and has been serious about its big data and analytics, choosing to deploy the right solutions. Organizations will soon adapt to the fact that it will be necessary to adopt big data solutions in order to grow, expand and stay in business.
Can Oracle maintain a dominant position and grow its hardware business? Investors should look for the growth outcome over time to how its vendors will take to purchasing and upgrading to these new products. Fiscal third quarter financials disappointed because its hardware results missed expectations. Oracle sells about $670 million of hardware per quarter. SPARC T5-8 is the fastest single server for Oracle Database. Oracle is now tasked with selling these products. The company will have to be able to really turn its hardware business around to growth to meet and exceed its customer's expectations. Big data today is about scaling with Business Intelligence, analytics and social streams. Velocity in high volumes of information in server systems that support big data analytics is the next trend.