Oracle earnings: Ellison “has a long way to go” to cloud success

Oracle building with blue sky in the background
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Oracle’s cloud revenues grew 45 per cent in its latest quarter, but analysts say it is far off CTO Larry Ellison’s aim of cloud dominance.

The database giant revealed its second quarter revenue results yesterday, posting earnings of $516 million for its SaaS, Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) services.

The sum pales in comparison to Oracle’s overall revenue, up three per cent to $9.6 billion over the quarter, but CTO and founder Larry Ellison bullishly predicted it would surpass $1 billion annual revenue in a year’s time.

"By Q4 of this year we expect our new cloud bookings to exceed $250 million,”, he said. "Next fiscal year our new cloud bookings will be well over the billion dollars mark."

While Oracle now counts 600 new ERP Fusion Cloud customers – a number it claims is five times as many as rival Workday has – analysts were quick to shoot down its ambitions.

Quocirca analyst Clive Longbottom told Cloud Pro: “The main issue is that the baseline was so low. With little to build from, 45 per cent is actually pretty poor performance.

“Oracle is still struggling to come up with a compelling cloud story - even SAP is more compelling.”

He added that Oracle should be performing better in the cloud market following its 2010 acquisition of Sun Microsystems.

“With the Sun hardware behind it (which includes the StorageTek storage heritage), Oracle should be doing well in cloud - it still hasn't worked out how to do "cloud", though, with confusing pricing models and a distinct lack of clarity in its messaging,” said Longbottom.

Oracle used its OpenWorld 2014 event in San Francisco this year to introduce its new cloud strategy, which encompasses SaaS, PaaS and IaaS as it tries to become an ‘all-in’ cloud partner to customers.

But TechMarketView analyst Angela Eager said this strategy may not chime with companies who want to take different cloud services from different providers, who are often specialists in their areas.

She said: “The main concern is that it wants customers to buy into a complete Oracle cloud stack (infrastructure to applications) which may be out of kilter with the open and mixed vendor cloud ethos."

Eager also expressed doubts over whether Oracle would catch up to its competitors Salesforce and Workday as soon as Ellison predicted.

“There is no doubt that Oracle is making cloud progress but it has a long way to go,” she said.

Oracle’s SaaS and PaaS revenues combined represented just four per cent of total revenue, and she said the $516 million figure was “a droplet compared to overall revenue”.

Meanwhile, Salesforce counted $1.4 billion revenue in its third quarter, predicting $5.4 billion overall in 2015.

However, Oracle beat Wall Street estimates of 68 cents per share by one cent for the quarter, and Eager said it was a reasonable quarter overall for the database giant.

“[It] has restored some confidence in the company and its cloud shift,” she concluded.