Enterprise software giant Oracle is facing a class action lawsuit from shareholders who allege company executives mislead them about what was driving its cloud revenue growth.
The suit, filed on Friday in California by the City of Sunrise Firefighters’ Pension Fund, argues the company was lying when it told investors its cloud sales were growing thanks to Oracle’s “unprecedented level of automation and cost savings,” as well as being “customer-focused” and “intimate partners with our customer.”
Instead, the lawsuit alleges sales were driven “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 programs,” a statement reads.
Oracle has dismissed the allegations. A spokesperson for Oracle told Bloomberg, “The suit has no merit and Oracle will vigorously defend against these claims.”
Historically Oracle has offered on-premise IT solutions but the company has shifted its focus as the market shifts to cloud computing software.
The suit specifically relates to the period of time between between May 10, 2017 and March 19, 2018. Oracle’s shares were smacked by the market in March when the company missed its quarterly forecast due to slower than anticipated cloud growth.
The complaint alleges, during that period Oracle violated provisions of the Exchange Act by issuing false and misleading press releases, filings with the US Securities and Exchange Commission, and statements during investor and analyst conference calls.
City of Sunrise Firefighters’ Pension Fund is represented by New York law firm Bernstein Litowitz Berger & Grossmann. The lawyers are taking expressions of interest to join the class action.