Larry Ellison is confident in Oracle Corp. Just listen to what the CEO just said as the company posted fiscal 2014 fourth quarter numbers:
Oracle is now the second largest Software-as-a-Service (SaaS) company in the world, … In SaaS, we're in front of everybody but Salesforce. In infrastructure-as-a-service (IaaS), we're larger and more profitable than Rackspace. We have by far the most complete portfolio of modern SaaS and Platform-as-a-Service (PaaS) products in the industry."
But if you listen to investors and Wall Street analysts, confidence and Oracle are not synonymous.
One analyst called Oracle's numbers this week "an all-around miss." Analysts were expecting 95 cents per share on $11.48 billion in revenue. They got 92 cents a share on revenue of $11.3 billion.
Which Way is North?
So where is Oracle going? Alex Zukin, senior analyst for Enterprise SaaS with Stephens Inc., told CMSWire Oracle is currently in a "full scale model transition to the cloud."
These transitions usually take some time to play out. Oracle is a player in multiple cloud segments, and there are multiple shifts from a product, organization and culture perspective that need to happen in our opinion for these shifts to be successful."
What about its vision in SaaS? Ellison has a "great vision," Zukin said, "and he has been there from the early days of cloud as an investor in two of the largest cloud companies Netsuite and Oracle."
However, he added, Oracle has a "ways to go in changing its perception with Fortune 1000 CIOs as a company with which they would be interested in spending NEW incremental application dollars."
Speaking of dollars, Oracle announced that fiscal 2014 Q4 total revenues were up 3 percent to $11.3 billion. It also unveiled:
- Software and cloud revenues were up 4 percent to $8.9 billion
- GAAP cloud SaaS and PaaS revenues were up 25 percent to $322 million, while non-GAAP SaaS and PaaS revenues were up 23 percent to $327 million
- Cloud IaaS revenues were up 13 percent to $128 million
- New software licenses revenues were unchanged at $3.8 billion
- Software license updates and product support revenues were up 7 percent to $4.7 billion
- Overall hardware systems revenues were up 2 percent to $1.5 billion with hardware systems products up 2 percent to $870 million, and hardware systems support up 2 percent to $596 million
The numbers didn't impress investors. Oracle shares fell 7 percent to $40.02 a share in after-hours trading Thursday and rebounded only slightly to close at $40.82 on Friday.
But the company's confidence remains.
"Our cloud subscription business is now approaching a run rate of $2 billion a year," said Oracle President and CFO Safra Catz. "As our business has transitioned, more software revenues are being recognized over the life of a subscription rather than upfront. We're making this transition to cloud subscriptions and ratable revenue recognition while continuously increasing our top-line revenue and our bottom-line profits year-after-year."
Oracle may have a long road ahead toward pleasing shareholders. Maybe the acquisition of Micros Systems will do the trick. Oracle made that one official today, announcing the $5.3 billion deal on its website.
Going forward, Zukin said generally that in "our coverage universe transitions such as this take some time to play out. However if executed successfully it can generate a solid mix of both growth and profitability."
And the competition isn't going anywhere. Zukin's firm likes Salesforce.com, Cornerstone OnDemand, Ultimate Software (ULTI) and ServiceNOW stock.
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