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While some new-gen IT naysayers contend that 37-year-old Oracle has seen its best days and is too proprietary and old-school to become a successful 21st-century IT supplier, the financial numbers, at least at this point, are not bearing this out.
Thirty-seven years is indeed an eternity in the tech world, but Oracle has proved itself to be a survivor instead of a company that’s ready for the front-porch rocking chair.
The Redwood City, Calif.-based all-purpose IT provider reported fourth quarter and fiscal year 2014 results after markets closed June 19, and buried in all those numbers is the fact that this company is selling more hardware and software year over year—and at higher margins—than it did in 2013 and in years prior.
Numbers Miss Wall Street Estimates, Stock Slides
Oracle reported quarterly adjusted earnings per share of 92 cents on revenue of $11.3 billion, up from 87 cents on revenue of $10.95 billion in Q4 2013. The numbers were just shy of the Wall Street consensus estimates (95 cents and $11.48 billion in revenue), and that naturally sent the stock reeling in after-hours trading. Oracle stock was selling at $40.25, down $2.26 (5.3 percent) two hours after the closing bell.
Software license revenue was flat compared with a year ago, with $3.8 billion in fourth-quarter revenues coming in. That, too, was likely a source of ire for investors. Software-as-a-service and platform-as-a-service subscription revenues grew by 25 percent to $450 million year over year, while cloud infrastructure-as-a-service revenues rose 13 percent.
Hardware sales and support revenues each increased modestly by 2 percent to a total of $1.5 billion. Oracle Services was a problem area, however, with revenues falling 4 percent year over year to $940 million.
Still, it’s hard to argue that a business that brings in $38.3 billion (up $1.2 billion over 2013) in a year—with more than $10 billion of that as profit—is ready for the retirement home. But Oracle, which claims to be a full-on, one-stop shop for all enterprises, still has plenty of work to do to stay where it is, which is a distant No. 2 in SaaS sales to Salesforce.
Ellison: Oracle Is Laser-Focused on SaaS and PaaS
“We are focused like a laser on one goal over the next few years: becoming the No. 1 company in cloud computing’s two most profitable segments, software-as-a-service (SaaS) and platform-as-a-service (PaaS),” CEO and co-founder Larry Ellison said on a conference call to analysts.
“We expect to become No. 1 for three reasons: First, we have the most complete and modern portfolio of SaaS products in the cloud; second, all of those SaaS applications run on the world’s most powerful platform in the cloud—the Oracle in-memory multitenant database—and the world’s most popular programming language—Java—and third, we have expanded our sales forces to sell SaaS and PaaS subscriptions against a new generation of cloud software competitors. And it’s working.”
This is all a pretty big change from only a few years ago, when Ellison famously was pooh-poohing the cloud as “just a bunch of PCs hooked up to the Internet.” Now his company is focusing a growing percentage of its sales, development and marketing strategy on just that—the cloud.
Also on the call, co-President and CFO Safra Catz said that Oracle’s cloud subscription business is closing in on a run rate of $2 billion a year. Her cohort, Mark Hurd, said that the company had its best quarter selling servers, analytics machines and storage since the company bought Sun Microsystems in 2010.
The 2 percent hardware revenue gain is a modest figure but is relatively substantial because Oracle has been struggling to sell the highly specialized, big iron-type data center products ever since the acquisition.