Technology giant Oracle (NYSE:ORCL) is a company in transition. It's undergoing a strategic shift in its core business, which should pave the way for a brighter future. However, that means the present will be challenging, and the last several quarters have been marred by sluggish growth and higher expenses.

Oracle's habit of missing quarterly revenue estimates is trying investors' patience. But, some notable signs of progress exist. Several large technology companies, including IBM (NYSE:IBM), are in the process of switching their focus. For such huge companies, these types of strategic shifts take time.

Focusing on the cloud
Oracle sold-off in after-hours trading upon releasing earnings because it missed revenue estimates for its third quarter. However, focusing on its core performance and not on whether it met analyst estimates paints a different picture, which may explain why the stock recovered during the day. Oracle achieved growth across its business, including its hardware unit. Hardware revenue grew 8%, which is notable considering hardware has long been a sore spot for the company.

This is echoed by IBM, which is also trying desperately to break away from hardware product sales. Like Oracle, IBM is determined to shift away from hardware and become much more of a technology consulting business, with a particular focus in cloud-based solutions and services. There's good reason for this, since IBM's hardware segment posted a 26% decline in fourth-quarter sales.

And, both Oracle and IBM have struggled in emerging markets recently. Oracle's Asia-Pacific segment posted an 11% drop in new software licenses and cloud software subscriptions so far in its fiscal year.

Similarly, IBM's revenue in the BRIC nations, which represent the emerging economies of Brazil, Russia, India, and China, collectively posted a 14% revenue decline in its most recent quarter. Both companies are intent on succeeding in emerging economies, and will likely have to accelerate their plans in these geographies in future quarters.

Even though Oracle's performance missed estimates, it still posted satisfactory growth. New software licenses and cloud software subscriptions revenue was up 4% to $2.4 billion. Software license updates and product support revenue was up 5% to $4.6 billion.

Growth is still growth
While Oracle's overall numbers may look unimpressive, there are underlying trends that are very positive for the company's future outlook. Its high-value cloud segments are growing rapidly and represent the path forward as Oracle moves away from hardware. Its cloud software subscriptions revenue grew 25% and sales in its engineered systems rose by more than 30% in the quarter. With contributions like these, Oracle was able to generate a record $15 billion in cash flow over the past twelve months.

Another item masking Oracle's underlying performance was the strengthening of the U.S. dollar in recent months. Companies that do a significant portion of their business overseas, like Oracle, see those sales translated into fewer dollars when the U.S. dollar increases. If you strip out the negative impacts of currency fluctuations, Oracle's GAAP earnings would have grown 12% and revenue would have increased 6%.

The bottom line
Technology companies like Oracle and IBM are rapidly switching focus from hardware products and services to software, particularly in the cloud. While this is clearly the right strategic direction to take, it will take time. Oracle and IBM are both huge, and engineering massive shifts doesn't happen overnight.

It's understandable for Oracle investors to become impatient, as the most recent quarter represented slower growth. However, Oracle's software and cloud businesses are growing rapidly, and the company even posted growth in its hardware unit. That's why investors should give Oracle a break and exercise excruciating patience.

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Bob Ciura has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines and Oracle.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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