There is always something to mull over in Oracle’s results and quarterly earnings calls, and the one this week for Q1 was no different. Oracle narrowly missed financial analysts’ estimates, but the stock markets don't seem too bothered. It was in the earnings’ call this time that the real action was to be had.
First thing to say about these results is that they are Q1 results, which are never really spectacular for Oracle as the period closes at the end of August and it is hard to close deals during the summer with so many people on vacation.
The other thing worth noting -- and we have seen this elsewhere -- is that global economic conditions are impacting all the big IT players, especially those that have a strong presence in the database market. For one, Europe is still in the doldrums, and two, the US government, and many other governments, are holding off on IT spending until they see where things are going.
That said, there were the usual points of interest in the Oracle results, not least of which was the appearance in the figures of a section dedicated to cloud computing, and revenues from cloud computing.
Oracle’s Cloud Computing
If you pointed this out to Larry Ellison he would no doubt argue that Oracle has always done cloud computing, even if it was under a different name, and that all Oracle is doing is adopting current terminology rather than changing its track.
That said, it’s interesting to see it there and it demonstrates that Oracle is pursuing this with the single-mindedness that it is pursuing the database market.
This should be no surprise really given Gartner’s prediction earlier in the week that cloud services will be worth US$ 109 billion this year. It also demonstrates that even the big companies are now beginning to see at least part of their future in the cloud.
Oracle’s Q1 Figures
So to the figures first. Overall sales, which is one of the principal numbers everyone looks to, dropped in value for Oracle by 2.3% to US$ 8.18 billion -- US$ 200 million less than the markets were predicting and hoping for.
Such a drop might have had substantial permanent impact on share price, which dropped initially by 2%, had the company not predicted that this year would see earnings at worst similar to last year’s earnings, and possibly evening increasing by 4% depending on what happens in the economy in general.
That said, net income still rose by 11% to US$ 2.03 billion, from US$ 1.84 billion for the same period last year, demonstrating why neither Oracle, nor the markets are really stressing at the moment.
Some other important figures worth noting include:
- New software licenses and cloud software subscriptions revenues US$ 1.6 billion, up 5%
- Hardware systems and support US$ 779 million, down 24%
- Software license sales and support US$ 4.1 billion, up 3%
- Hardware systems products revenues (GAAP) down 24% to $779 million
- Net income US£ 2.0 billion, up 11%
Cloud Computing, Databases
An important marker in this set of figures is the fact that cloud subscriptions and software licenses have been lumped together and combined have made US$ 1.6 billion.
The cloud business is also likely to show even more growth in the coming quarters as CEO Larry Ellison has held to earlier promises and expanded the Oracle sales force massively over the past couple of quarters. Its global workforce now stands at nearly 116 thousand, up from just over 109 thousand a year ago, and many of those new jobs are focused on selling Oracle cloud services.
Another notable point in the figures was the performance of Exadata, Exalogic, Exalytics, which performed particularly well over the quarter, producing growth figures that will make other database vendors green:
Exadata, Exalogic, Exalytics and our other engineered systems grew more than 100 percent in the quarter," president Mark Hurd said. "For the full year, we expect to double engineered systems sales to well over $1 billion. Oracle's new cloud business is also approaching a $1 billion annual run rate. These two businesses will drive Oracle's growth for years to come."
The last thing worth mentioning here is that this set of figures is always important for Oracle, if only for the fact that they come just before its annual OpenWorld fest.
This time, for OpenWorld, Ellison has hinted a number of new release announcements that are worth watching out for. He said that he would be using his keynote address on September 30 to unveil a new version of Oracle's database software, 12c. And again, this release will be for enterprises that are hosting cloud-computing software.
Other cloud offerings to be announced over the course of the OpenWorld week will include CRM, ERP and HCM applications-as-a-service as well as additional database, Java and social network platform services.
He also indicated that those that are interested in Infrastructure-as-a-Service (IaaS) will be able to find out more about its IaaS offering in the Oracle Cloud, and IaaS on a private cloud in enterprise data centers.
So an interesting year for Oracle ahead as it continues to build its cloud business. Watch out here for the details to come during Oracle OpenWorld.