- Company Name
- Oracle Corporation
- Stock Symbol
- Class Period
- May 10, 2017 to March 19, 2018
- Motion Deadline
- October 9, 2018
- Northern District of California
The complaint charges Oracle and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Oracle is a multi-national technology company and one of the largest software companies in the world. The Company offers both on-premises and cloud solutions to a variety of end users. Unlike on-premises solutions, which are installed on a user’s computers, cloud solutions are accessed through the internet and are typically hosted by a third-party vendor like Oracle.
The complaint alleges that throughout the Class Period, defendants misrepresented the true drivers of the Company's cloud revenue growth. In particular, defendants falsely attributed the Company’s revenue growth in its cloud segment to a variety of factors and initiatives, including, among other things, Oracle’s “unprecedented level of automation and cost savings,” as well as the Company being “customer-focused” and “intimate partners with [its] customer.” In truth, Oracle drove sales of cloud products by using improper tactics, including threatening current customers with “audits” of their use of the Company's non-cloud software licenses unless the customers agreed to shift their business to Oracle cloud programs. The use of such tactics concealed the lack of real demand for Oracle’s cloud services, making the growth unsustainable and ultimately driving away customers. As a result of defendants’ misleading statements and their failure to disclose these improper tactics, the price of Oracle stock was artificially inflated to more than $52 per share during the Class Period.
On March 19, 2018, Oracle disclosed that cloud revenue growth had become stagnant and forecast significantly slower sales growth for its cloud business than its competitors. Specifically, the Company reported that quarterly cloud revenue rose only 32%, or just half the average reported quarterly growth over the past two years, and Oracle projected that cloud sales growth would decline even further to only 20% in the following quarter. Following these disclosures, analysts connected Oracle’s poor financial performance to its improper sales tactics, with one observing that Oracle had to rely on coercive practices because its cloud-based offering is a “bare-bones minimum viable product.” As a result of this news, Oracle shares declined nearly 10%.