Ellison defends Oracle's cloud strategy and pricing against Amazon, Microsoft

Ellison defends Oracle's cloud strategy and pricing against Amazon, Microsoft

Summary: "We have a considerable advantage," Ellison defended. "At the infrastructure level, we intend to be price competitive with Amazon, Microsoft Azure and Rackspace.”

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Following a widely-noticed absence from the call last quarter, Oracle CEO Larry Ellison chimed in with promises about the coming year during Wednesday's second quarter earnings conference call.

Company executives likely went into the meeting more comfortable, even confident, given that earnings and product subscriptions increased noticeably over the last three months.

The Redwood Shores, Calif.-headquartered company was expected to report second quarter earnings of 67 cents a share with flat revenue of $9.2 billion. Morgan Stanley and RBC had already both cut their ratings last week, so things weren't looking great going into Wednesday's earnings announcement.

Nevertheless, Oracle did better than expected with second quarter earnings of $3.2 billion, or 56 cents a share, on revenue of $9.3 billion, up two percent annually. Non-GAAP earnings were 69 cents a share.

Oracle is going into 2014 with refreshed versions of the key products expected to drive revenue over the coming year, Ellison assured, highlighting updates to CRM and ERP applications as well as the flagship  multi-tenant Database 12c, which is designed specifically to serve cloud needs.

However, Oracle’s cloud strategy still seems, well, cloudy to some Wall Street analysts.

Ellison responded that the strategy is "to be a player in all three levels of the cloud," which he narrowed down to software, platform, and infrastructure. He further predicted that Oracle will be particularly strong in Platform-as-a-Service based on Oracle’s strength in databases as well its ownership of the Java programming language.

"We have a considerable advantage," Ellison defended. "At the infrastructure level, we intend to be price competitive with Amazon, Microsoft Azure and Rackspace.”

Ellison also boasted that Oracle has more enterprise SaaS applications than any other cloud provider.

Chief financial officer Safra Catz spoke in plainer terms, noting that Oracle has ramped up the sales organization for cloud to “full strength,” but she reasoned that it takes time for that to pay off.

Oracle president Mark Hurd added that those sales resources are driving 35 percent bookings growth in cloud, and triple digits in some core Fusion modules. The bad news, he lamented, is that those results are not displayed as licenses, but rather showing up as subscriptions.

Still, analysts kept coming back to the cloud topic again and again throughout the hour.

When asked about customer reception, Hurd replied that Oracle goes to market by “functional area,” such as HCM, acknowledging that some of those chief human resource officers have already been subscribers of Oracle’s HCM products before its cloud platform debuted in 2012.

Ellison emphasized, “We are organized against our secular competitors.” He specified that Oracle decided it had to line up an Oracle-Salesforce.com deal against Workday while also enabling a team that competes against its professional friend and foe Salesforce on other products.

He explained this is done to compete effectively against a “new generation of specialists."

Looking forward to the third quarter, Catz projected that total revenue will grow by roughly three to seven percent in constant dollars, or two to six percent in U.S. Dollars, with earnings of 68 to 72 cents per share in constant and reported dollars.

Topics: Enterprise 2.0, Enterprise Software, Hardware, Oracle, Software

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  • Second batch of Oracle salesforce jumping ship this year impacting business

    Safra Catz claims that “Oracle has ramped up the sales organization for cloud to ‘full strength’.” The reality is that after last summer where demotivated sales reps left in droves, another substantial portion of the sales force is applying for jobs outside the company because they are frustrated and deeply dissatisfied with the hardware quota they were given. Can you blame them? When all you know is to sell software, suddenly you are asked to sell what former Oracle über sales chief Keith Block called “the dud Sun business”. This is a disaster and the revenue figures reflect it.


    To understand all that goes on behind the scenes at Oracle I cannot recommend enough an excellent book, "High-tech planet" written by a former Oracle sales executive. It is a funny, terrific and insightful account of what hides behind headlines-grabbing news and figures. It describes in detail the business atmosphere at Oracle, its sales culture plus a host of shenanigans that will have you shake your head in disbelief unless you work or worked for Oracle.

    I got an education reading this book, as well as an understanding of what Oracle’s future prospects are, especially in the cloud business where the likes of Salesforce.com and Workday are eating its lunch.

    The first few chapters can be sampled for free here: http://amzn.to/czf0qw
    alimam
  • Oracle owns the Java Language?

    I keep hearing this lie over and over again. Oracle does NOT own the Java language. Before selling out to Oracle, Sun released Java into the public domain. They retained ownership of the Java TRADEMARK, but nothing else. Oracle cannot prevent me fro creating a new Java virtual machine, or from creating a new language extension. After all, if Oracle owned Java, then Hibernate would have been pulled from GA, as would Struts, Spring, IBM WebSphere, and eclipse. Nobody really owns the language any longer. This is like saying that BASIC is owned by Microsoft. It is not and never was. Visual Basic, on the other hand, is Microsoft property, just as the Oracle JVM belongs to Oracle. Oracle owns Glassfish, the NetBeans IDE, and JDeveloper, but they don't own Java just because Larry Ellison says they do. We're seeing the Oracle version of the SCO Group versus Linux lawsuit, and it will turn out the same way, with Oracle losing big time and destroying what little revenue they have left.
    Garry Hurley Jr
  • Oracle's pricing stragey

    Larry needs the cash to buy another island, he has his eye on Manhattan Island.
    Alan Smithie