Oracle's Legacy Business A Drag On Q1 Results

Shares of Oracle Corporation (NYSE: ORCL) were trading lower by more than 4 percent on Friday after the company reported its first-quarter results Thursday.

According to Ed Maguire of CLSA, Oracle demonstrated improvements in its cloud SaaS and PaaS businesses but were yet again offset by declines in its legacy business, namely on-premise licenses and hardware.

Specifically, total software and cloud revenue rose 6 percent in a constant currency basis due to a 79 percent growth in SaaS/PaaS and 3 percent growth in software support. On the other hand, new software licenses fell 10 percent while hardware dipped 11 percent.

Related Link: Oracle Shares Tick Lower Following Q1 Earnings Miss

Total new software (cloud plus new licenses) rose 14 percent year-over-year and was aided by stronger SaaS performance along with the acquisition of Opower and Textura.

Despite Oracle's continued momentum in the cloud, Maguire cautioned that it comes at a time when competition, especially from Amazon.com, Inc. (NASDAQ: AMZN)'s AWS, "looms larger."

Bottom line, the analyst stated that while Oracle's overall mix is indeed "trending constructively," the company's overall growth profile remains "dampened by legacy erosion." As such, Maguire maintained an Underperform rating on Oracle's stock with an unchanged $42 price target.

At time of publication, Oracle was down 4.65 percent on the day at $38.96.

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