Advertisement
Canada markets open in 2 hours 11 minutes

  • S&P/TSX

    21,740.20
    -159.79 (-0.73%)
     

  • S&P 500

    5,061.82
    -61.59 (-1.20%)
     

  • DOW

    37,735.11
    -248.13 (-0.65%)
     

  • CAD/USD

    0.7249
    -0.0005 (-0.06%)
     

  • CRUDE OIL

    85.15
    -0.26 (-0.30%)
     

  • Bitcoin CAD

    86,501.17
    -4,907.93 (-5.37%)
     

  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     

  • GOLD FUTURES

    2,388.70
    +5.70 (+0.24%)
     

  • RUSSELL 2000

    1,975.71
    -27.47 (-1.37%)
     

  • 10-Yr Bond

    4.6280
    0.0000 (0.00%)
     

  • NASDAQ futures

    17,870.75
    -5.50 (-0.03%)
     

  • VOLATILITY

    19.20
    -0.03 (-0.16%)
     

  • FTSE

    7,852.24
    -113.29 (-1.42%)
     

  • NIKKEI 225

    38,471.20
    -761.60 (-1.94%)
     

  • CAD/EUR

    0.6816
    -0.0008 (-0.12%)
     
MARKETS LIVE BLOG:

STOCKS SLIP WITH MIDEAST TENSIONS, EARNINGS IN PLAY

Oil pares losses as traders anticipate Israel's response to Iranian attack

Why the Strengthening US Dollar Posed Concerns for Oracle

Anne Shields

Key Takeaways from Oracle’s 1Q16 Results

(Continued from Prior Part)

Strengthening US dollar

In the first part of this series, we discussed Oracle Corporation’s (ORCL) performance in 1Q16. The strengthening of the US dollar (UUP) continues to negatively impact the technology sector, as we’ve seen in the recent fiscal earnings results of companies like EMC Corporation (EMC), IBM (IBM), and Microsoft Corporation (MSFT), just to name a few. But the appreciating of US dollars in comparison to other major currencies certainly didn’t spare Oracle either.

Oracle’s 1Q16 earnings report showed a decline of approximately 3%, but a 7% rise on a constant currency basis. At the same time, Oracle’s net income, which declined by 20% on a YoY (year-over-year) basis in 1Q16, only declined by 8% when measured on a constant currency basis. Over the past year, the US dollar has appreciated by 14% against the other major currencies, which has resulted in a decline in demand for goods and services produced in the US.

ADVERTISEMENT

Fall in new software licenses sales

As we discussed previously in this series, approximately 55% of Oracle’s business is done outside the US. In 1Q16, Oracle reported a sales decline of 16% in new software licenses. On a constant currency basis, this decline was 9%. The strengthening of the US dollar in comparison to other major currencies aggravated this decline particularly. At constant prices for licensing, an appreciating dollar translates to higher relative-value-to-earnings in the US, but lower earnings outside the US relative to the dollar.

New licenses sales hold particular importance on an industry level, as they are considered a barometer for customer demand for their databases and other business applications.

The above chart shows the performance of the PowerShares ETF. The chart follows the US dollar’s price movements in the past year. In the next part of this series, we’ll look at which region added the most toward Oracle’s revenues in 1Q16.

Continue to Next Part

Browse this series on Market Realist: