Oracle delivered its third earnings miss in 12 quarters---sixth revenue shortfall relative to estimates in the same time frame---but CEO Larry Ellison and the gang said all is well. You just wait for summer.
Summer?!? Yes, that season of beaches, sun and vacations (and Ellison on his yacht a bit more) happens to be Oracle timeline for a bevy of product refreshes that'll change the game for the company.
Like a summer blockbuster movie, Oracle has the following plotlines planned.
And like some of those dopey movies we'll get this summer there will be plenty of explosions too. We're just not sure whether Oracle will be the one blowing up. Analysts are a tad skeptical at the moment. When a company blames Venezuela's currency manipulation---as if that's a new development---analysts start to wonder. Cowen analyst Peter Goldmacher noted that software sales---not Venezuela---was the reason Oracle fell short on earnings.
Simply put, a move to the cloud is hurting software sales and revenue. Oracle CFO Safra Catz explained the license to cloud transition on a conference call. Goldmacher said:
Software sales fell short of expectations, which management attributed to an increasing contribution from its Cloud business. Assuming a 3-year contract duration, this would mean the company generated $5M-$10M in subscription revenue in the quarter in lieu of $65M-$70M in license revenue. Given that Cloud organic constant currency growth in subscription is only in the high single digits, we infer the company is finding it difficult to generate growth no matter the delivery method.
Luckily, we have Oracle's summer blockbusters to save the day.
Ellison and company mentioned summer more than SAP on its earnings conference call. Consider:
On the cloud, Ellison said:
The Infrastructure as a Service is going to be priced pretty much equivalent to Amazon. We think that's a commodity business, and not in any way a bad -- in a bad sense. To play that game, you have to be -- we're going to have a compute service and a storage service. The storage service is already out. The compute service is going to be released en masse shortly. And that will be very competitive, we think, with Amazon or anybody else in this business.
The big differentiator, for us, is, along with Infrastructure as a Service, we have a very strong Platform as a Service offering coming out with our infrastructure, and that's, of course, our two major platform plays in middleware -- it's Java and the database, of course, is Oracle. We think that gives us a unique pair of differentiators in the Infrastructure or Platform as a Service is taken together, and we think that's what our customers are going to do.
Customers are going to come to us and buy our platform in the cloud and buy infrastructure in the cloud, and move a lot of their existing applications out of their own data centers into our cloud, and they can do that without having to change their applications at all. They can move their applications intact to our cloud, and get all of the cost benefits, all of the efficiencies of scale, and they don't have to change the apps at all. We think that's a unique proposition we offer our customers. And again, delivery time is all this Summer.
On 12c, Ellison said:
If I could just add one thing to that. With the release of Oracle In-Memory database with 12c, our data analytics performance is going to increase by more than a factor of 10 -- some cases more than a factor of 100. We think this Summer with 12c, our data analytics business is going to take off. And, of course, the intention is to sell a lot of those data analytics products in the cloud, as opposed to on-premise. We will give customers a choice, but we'll offer that data analytics in the cloud, data analytics on-premise -- it's a big push for us.
And on Fusion apps, Oracle president Mark Hurd said:
Our Fusion products are now in release 8, with 1,000 new features in that release with improvements. Coming with release 9, again, this summer will be a similar number of new features. So release 8, 1,000 new features, release 9 this summer with roughly the same number of features. Along with Responsys and BlueKai soon, we continue to gain momentum on the product side, the customer side, and you will see this in our financial performance.
We have no idea if Oracle execs were in chaise lounges when they did the earnings conference call, but they could have been. Clearly, Oracle's fate is tethered to the summer.