Tough Challenges ahead of Oracle’s Fiscal 1Q16 Results
Oracle exposed to the dollar’s vagaries
Earlier, we discussed Oracle’s upcoming fiscal 2Q16 results. In fiscal 1Q16, Oracle’s (ORCL) results were negatively impacted by a strong US dollar as Oracle earned more than 50% of its revenue from North America and Latin America. The remaining revenues came from the EMEA (Europe, Middle East, and Africa) region and the Asia-Pacific region, including Australia, India (INDY), and South Korea (EWY). It’s very likely that the scenario would be same in Oracle’s fiscal 2Q16 results.
According to Goldman Sachs, the technology industry as a whole, including Apple (AAPL), IBM (IBM), and Microsoft (MSFT), is dependent on foreign countries for approximately 60% of revenues. As a result, a rising dollar aggravates the technology industry and consequently its players’ concerns.
The dollar is on the rise, again
The graph above shows the performance of the PowerShares ETF that follows the US dollar’s price movements. As you can see, the US dollar has been on a rise since mid-October. The US dollar gained strength due to the increased anticipation of the Fed’s interest rate hike in December.
In the first week of December 2015, Fed Chair Janet Yellen said that the US economy looked strong. The non-farm payroll report released in early December 2015 stated that the economy added 211,000 jobs in November. This was better than the expected 200,000 jobs and indicated the US economy’s strength. As such, the report increased the chance of an interest rate hike.
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