Oracle (ORCL) Didn't See The Beating It Took at Coronavirus' Hands Coming

Sometimes it's all about the knock-on effects. While it would be easy to think that Oracle (NYSE: ORCL), like a lot of tech companies, might have received a nice bump upward thanks to the coronavirus and the fury of work-from-home options it inspired, the opposite is instead true. Not only did the company lose some serious ground in the last quarter, but the odds of even returning to profitability in the next quarter are a meager coin flip's worth. So what happened to take down the Oracle? As it turns out, it's those very same knock-on effects that hurt Oracle's operations most.

Not a Great Several Days for Oracle

The numbers that emerged for Oracle were anything but positive. The company expects its adjusted fiscal first quarter earnings to come in somewhere between $0.84 and $0.88, and that's built around projections that revenue will be either up or down by 1%. That puts the company's revenue projection somewhere between $9.31 billion on the high end and $9.13 billion on the low end.

FactSet consensus projections, meanwhile, expect earnings to come in that range at $0.85, but they expect significantly lower revenue than either of Oracle's projections at $9.05 billion.

As for its fiscal fourth quarter, the company reported a slight drop in revenue against the last fiscal fourth quarter, bringing in $0.99 a share on net income of $3.11 billion, as compared to $1.07 a share in the previously-compared period. Revenue, meanwhile, for the fiscal fourth quarter was down to $10.44 billion from $11.14 billion the year prior.

When Many of Your Clients Are Forced By Law To Close....

The biggest problem for Oracle, as revealed by CEO Safra Catz, was that it had a compound problem to face. While it took a hit from the coronavirus pandemic just as much as almost anyone else did, that hit would have been comparatively minor by itself, especially considering the depth and breadth of the other hits taken throughout the business world.

Oracle, however, took it on the chin in two different directions. It not only had the regular losses, but it also had the knock-on effects of losing a lot of its client base to the coronavirus. Oracle has a surprising bulk of customers in the transportation field, retail field, and hospitality field, many of which were themselves crippled or forced to shut down outright. That in turn drove much of their own purchasing back to the nebulous date of “when we're allowed by federal and / or state mandate to open”.

That's When the Awkward Questions Started Up

So the obvious question posed to Catz et al was when, roughly, will Oracle actually be, you know, profitable again? The bad news is that no one's quite sure what the answer is on that one, and current projections say there's only about a 50-50 chance of that happening with the new quarter. Catz noted that “growing businesses” were now larger than “declining businesses,” which in turn should give revenue growth a shot in the arm.

Brett Thill, an analyst with Jefferies, meanwhile noted that Oracle's fourth-quarter revenue wasn't exactly any great shakes, and the fourth quarter should be a naturally strong one for Oracle to begin with. Thill also noted there were a growing number of companies who stood as competitors on at least some level, including Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN).

With 31 analysts covering Oracle, the outlook is actually pretty good right now. Just one of those analysts has a sell rating in place, while 10 are at buy or “overweight.” The remaining 20, meanwhile, are at “hold”, which isn't exactly the greatest, but far from the worst either.

Also working against Oracle here is its comparative lack of diversification, especially in the face of its competitors as mentioned previously. Microsoft has its hands in commercial software, and heavily into video gaming as well. Amazon not only has all of that, but also has streaming video, grocery stores, and that whole “mail-order” thing that it's into. Either one of those businesses is vastly more likely to weather a downturn than Oracle possibly can, and that's absolutely clear from the numbers the last few months.

Still, Oracle has name recognition on its side, and a lot of already very happy customers who don't see much point in switching over. Once the impacted businesses come back online—which you're already seeing in a lot of places—the end result should be a positive one for Oracle. Positive until the next downturn, anyway...which represents the biggest problem of all for Oracle. Its lack of diversification in revenue streams might well do it a lot more harm than good