Oracle cloud left fuming over Firefighters’ Pension Fund lawsuit
Oracle has been hit by a securities class action lawsuit that claims it was less than open over the true drivers of its cloud revenue growth.
The law firm Bernstein Litowitz Berger & Grossmann has filed the lawsuit on behalf of its US client City of Sunrise Firefighters’ Pension Fund against Oracle.
Amidst the legalese, the investors purchased Oracle’s stock between 10 May 2017 and 19 March 2018. The fund manages around $143 million for 235 participants.
The complaint alleges that, during the this period, Oracle issued false and misleading press releases, filings with the US Securities and Exchange Commission (SEC), and statements during investor and analyst conference calls.
“The suit has no merit and Oracle will vigorously defend against these claims,” states Deborah Hellinger, a spokeswoman for Oracle.
The lawsuit says Oracle “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 our customer’.”
Seems they don’t like jargon either.
It goes on as the lawsuit adds: “In truth, Oracle drove sales of cloud products using threats and extortive tactics.
“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.
“Among other things, the company threatened 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 programmes.”
According to the lawsuit, “the truth” was revealed on 19 March 2018, when the company disclosed that cloud revenue growth had stagnated and forecasted significantly slower sales growth for its cloud business than its competitors. Let’s not forget it is up against Amazon, Microsoft and Salesforce in this sector.
Back in March, sales of Oracle’s cloud unit made up 16% of its total quarterly revenue. Its stock was downgraded – the firm’s worst slump in more than six years.
The lawsuit concludes: “Following these disclosures, analysts and market commentators connected Oracle’s poor financial performance to its improper sales tactics. As a result of these disclosures, the price of the company’s stock declined significantly.”