Latest Oracle Earnings Show Damage Caused By Strong Dollar

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By Jacob Maslow

oracle corporate campusDatabase giant Oracle (NYSE:ORCL) is the latest victim of the profit-depressing damage the strengthening US dollar can cause. The Redwood Shores, California company reported that its net income shrank by 3% in the latest quarter due partly to the surging dollar. When the US dollar appreciates, companies that price their products in dollars become less attractive as competing non-American products and services look cheaper by comparison.

Due to the fact that Oracle does a lot of business in overseas markets, it is particularly vulnerable to the income depressing power of the surging US dollar. It is hardly alone. American multinationals ranging from heavy equipment maker Caterpillar, OS and cloud giant Microsoft to personal consumables titan Proctor and Gamble have all reported disappointing earnings due to strong dollar growth.

Since Oracle also announced a 25% increase in its dividend, raising its payout from 12 to 15 cents per share, this Silicon Valley database giant’s stock wasn’t hit too hard by its bad income news.

Going forward, however, the future looks uncertain for Oracle. Its established line of database products show growth maturity. It has recently moved towards transitioning to a more cloud-based ‘software as a service’ model. While this is definitely a good way to stay current with market demand and tastes, such transitions are hardly smooth.

As promising as Oracle’s cloud offerings may be, a large chunk of its profits still come from non-cloud operations. It remains to be seen how long it will take for the company to fully transition. Any stock dips caused by transition hiccups might be good opportunities to buy into this solid company.


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