NEW YORK, Aug 11 — Oracle Corp is named in a lawsuit alleging the company’s executives lied to shareholders when they explained why cloud sales were growing.
The investor leading the case, the City of Sunrise Firefighters’ Pension Fund, claimed Oracle engaged in coercion and threats to sell its cloud-computing products, creating an unsustainable model that fell apart, according to the suit seeking class-action status and filed yesterday in San Jose, California. The Florida-based firefighter pension fund and other investors lost money when Oracle’s stock plummeted in March after reporting a disappointing earnings report and outlook, according to the lawsuit.
“The suit has no merit and Oracle will vigorously defend against these claims,” Deborah Hellinger, a spokeswoman for Oracle, said in a statement.
The world’s second-largest software company has sought to pivot to cloud computing software and services to catch up to rivals Amazon.com Inc and Microsoft Corp. The company has launched cloud products aimed at converting existing customers who currently run Oracle’s software on their own corporate servers.
After a few years, the effort is still nascent and Oracle trails market-share leaders in key segments. The Redwood Shores, California-based company stopped disclosing specific cloud sales metrics as of June, giving investors less insight into its transition to internet-based software.
The suit claimed that Oracle’s executives lied in forward-looking statements, which are never guaranteed, during earnings calls and at investor conferences in 2017 when they said customers were rapidly adopting their cloud-based products and cloud sales would accelerate.
The firefighter pension, which manages about US$143 million (RM584.2 million) for 235 participants, alleged that Oracle used software licence audits and weakened existing maintenance programs to compel customers to buy the cloud products.
“In truth, Oracle drove sales of cloud products using threats and extortive tactics,” the filing reads. “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).” These tactics weren’t known to investors and were “expressly denied by the company,” it added.
Oracle fell 9.4 per cent on March 20 after forecasting slowing cloud sales.
The case is City of Sunrise Firefighters’ Pension Funds v. Oracle Corp, 5:18-cv-04844, US District Court, Northern District of California. — Bloomberg
Source: The Malay Mail Online