Oracle Corp. announced on Friday that it is relocating its corporate headquarter from Redwood City, California to Austin, Texas, becoming the latest tech company to leave Silicon Valley.
The move comes at a time when the company is trying to cut costs while restructuring itself from a traditional software provider to a cloud computing enterprise. It has also been trying to adjust its product portfolio in recent years to better compete with rivals.
The company stated in a filing that its employees can choose to work from home. The latest move is expected to have a positive impact on the company’s growth, while offering employees more room to decide on how and where they are going to work, according to Oracle .
Source: Getty Images [working from home has become the new normal]Many companies and senior business executives have relocated from California to elsewhere after the Covid-19 pandemic due to the higher operations costs and heavy taxes of the state. The relocation was also spurred by the increasing work-from-home trend following the pandemic. Earlier this month, Hewlett Packard Enterprise made a similar move by announcing that it is moving its headquarters from California to Texas.
Separately Tesla Inc.’s Chief Executive Officer Elon Musk also recently shifted to Austin. Musk earlier criticized California over its management related to the pandemic. In July, he chose Austin for building a new $1.1 billion manufacturing plant for Tesla. The facility is expected to hire up to 5,000 workers.
Oracle already has some presence in Austin. It has a five-story campus spread over an area of around 560,000 sq. ft. Moreover, it has around 4,500 employees in Texas. The company expects its corporate campus workforce in Austin to grow further in the coming time.
Oracle’s Financial Performance
Oracle recently announced its financial results for the fiscal second quarter that surpassed the consensus forecast. The strong performance was mainly driven by higher demand for its cloud and software products as an increasing number of individuals started working from home due to the pandemic.
It reported earnings of 2.44 billion, or 80 cents per share for the three-month period ended November 30, up from $2.31 billion, or 69 cents per share, in the comparable period last year. On an adjusted basis, profit rose to $1.06 per share, beating the analysts’ average estimate of $1 per share.
Revenue came in at $9.8 billion, as compared to $9.62 billion in the year-ago quarter. On the other hand, analysts were expecting Oracle to post revenue of $9.77 billion.
Source: Getty Images [CEO Safra Catz]CEO Safra Catz said in a statement, “Our highly profitable multibillion-dollar Fusion and NetSuite Cloud ERP applications businesses grew revenue 33% and 21%, respectively, in Q2. These two strategic cloud-applications businesses are major contributors to Oracle’s increased operating earnings and consistent earnings-per-share growth.”
The cloud services and license support segment generated revenue of $7.1 billion in the quarter, up 4 percent on a year-over-year basis. The segment also includes cloud-hosting revenue. Comparatively, revenue from the cloud license and on-premises license segment slipped 3 percent to $1.09 billion, indicating the company is inking fewer software agreements.
Oracle is aggressively expanding its cloud operations around the world. It expects to make 38 Cloud regions operational during the first half of 2021. Moreover, the company has recently launched three new commercial cloud regions in UAE, UK, and Chile, respectively.
Q3 Outlook
Oracle also projected its earnings and revenue for the current quarter. It expects to report an adjusted profit in the range of $1.09 per share to $1.13 per share for the third quarter, above the consensus forecast of $1.04 per share.
Revenue is expected to grow between 2 to 4 percent in the quarter. On the other hand, analysts were looking for revenue growth of 1.4 percent for the current quarter.
Technical Analysis
Oracle stock has performed reasonably well in recent months considering the difficult operating environment during the pandemic. The stock has jumped more than 14 percent so far this year. Its share price touched a low of around $40 in March and a high price of around $62 in October. The stock is currently trading near its 52-week high after reporting better-than-expected results for the second quarter.
