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Summary

  • Cloud Computing: Latest Oracle hire is super smart.
  • Engineered Systems: Really a growth play?
  • Internet of Things (IoT): Java must deliver.
  • Big Data: Oracle must dominate.
  • Social Enterprise: Real opportunity or market hype?

When Oracle Corp. (NYSE:ORCL) announces Q4 2014 earnings on June 19, I'll be listening closely to see if the software giant shows momentum in five key areas: Cloud computing, Engineered Systems, Internet of Things (IoT), Big Data and Social Enterprise. Here's why.

No doubt, long-term Oracle investors have seen good returns in the past two years; shares have gradually climbed from about $28 in June 2012 to about $42 as of June 16, 2014. But Oracle faces many of the same challenges that now pressure Cisco Systems Inc. (NASDAQ:CSCO), IBM Corp. (NYSE:IBM), Hewlett-Packard Co. (NYSE:HPQ) and SAP AG (NYSE:SAP): Selling hardware and/or software into corporate IT departments is no longer a sexy, high-growth market opportunity.

Further complicating matters for Oracle, the company has bet heavily on niche, high-end hardware and software (SPARC and Solaris) opportunities -- even as commodity alternatives continue to proliferate data centers and cloud markets.

Sure, Oracle CEO Larry Ellison and his team have overcome skeptics like me multiple times. But how is the company really performing -- right here, right now? Listen closely to the June 19 earnings call for clues in the following five areas:

1. Oracle Cloud: Critics say Oracle was late to the cloud market. But I've been impressed with Oracle's progress over the past year. And in recent weeks, Oracle hired Bharath Natarajan -- a Tech Data Corp. (NASDAQ:TECD) veteran -- to accelerate the company's cloud partner push. I like that move. A lot.

I just wish Oracle said far more about recurring revenues from its cloud push. Especially since:

  • Amazon Inc. (NASDAQ:AMZN) Web Services, Microsoft Windows Azure and Google Cloud Platform have serious momentum;
  • IBM is regaining focus with SoftLayer; and
  • upstarts like WorkDay Inc. (NYSE:WDAY) are impossible to ignore.

Back in March 2014 during the Q3 2014 earnings release, Oracle said cloud software subscription revenues rose 24 percent. That sounded impressive. But what are the actual dollars and cents -- both then and now?

2. Engineered Systems: That's Oracle's terminology for hardware and software designed to work together. From SPARC processors to the operating system (Solaris), database, middleware and applications, Oracle insists Engineered Systems can deliver better price-performance than commodity alternatives -- such as Intel Corp. (NASDAQ:INTC) x86 and Linux -- or proprietary rivals like IBM Power.

Back in March 2014 during the Q3 2014 earnings release, Oracle said Engineered Systems revenues grew more than 30 percent. But this time around, I'd like deeper details on just how much revenue -- in dollars and cents -- Oracle hopes to drive from Engineered Systems in upcoming quarters.

My big concern involves a potential industry shift to software-defined data centers that leverage commodity servers. Google and Facebook already leverage such a strategy in their respective data centers. If that trend grows, SPARC and Solaris will face even more pressure.

3. Internet of Things : Oracle never became a mobile powerhouse. But the Internet of Things hype cycle offers a fresh chance at the mobile and "connected" markets. If Oracle has its way, Java will be the preferred software for connecting and managing IoT devices, sensors and more.

Still, every major IT company has its own IoT effort under way. Plus, Google (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) have their respective Connected Home initiatives in high gear.

In some developer circles, Java is starting to look like Microsoft Windows -- aging technology that needs some fresh updates for modern programmers. Is Oracle keeping pace? The earnings call may contain some clues.

4. Big Data: Larry Ellison is betting heavily on Oracle Database In-Memory. And each time Ellison decides to wage a database business war he typically wins.

Sure, Microsoft SQL Server has gained some ground in recent years. And NoSQL databases are now the rage.

But data management is Oracle's DNA. And Big Data management is a natural extension to that discussion. I think SAP's HANA was a serious wake up call to Oracle's management. And I'd watch for Oracle to communicate serious -- and I mean serious -- progress in this market segment.

Also of note: Oracle has made Big Data-related acquisitions such as the recent BlueKai buyout. Oracle claims BlueKai is the "leading cloud-based big data platform that enables companies to personalize online, offline and mobile marketing campaigns with richer and more actionable information about targeted audiences."

But is BlueKai generating dollars for Oracle yet? I'm listening for clues.

5. Social Enterprise: Here, Oracle talks about its Social Cloud technology. But I still hear far more about Microsoft Yammer, Salesforce.com (NYSE:CRM) Chatter and Jive Software Inc.'s (NASDAQ:JIVE) social enterprise platforms.

Further complicating matters, I'm not sure social enterprise software is truly a long-term growth play. Consider this: Jive is among the market's growth players, yet the company's Q1 2014 revenues grew only 21 percent to $41 million. That's a $164 million annual revenue stream -- not exactly a huge figure for rivals like Oracle.

Bottom line: Oracle is striving to compete in a range of emerging markets (IoT, Social Enterprise, Cloud) even as the company seeks to boost sales in traditional markets like corporate data centers.

The company has hit some turbulence in recent years, but Oracle shares have quietly climbed upward over the past two years. We'll see if the climb continues when fiscal Q4 2014 earnings arrive on June. 19.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The author is long on Red Hat (NYSE:RHT) and Rackspace (NYSE:RAX) and owns a range of technology companies through multiple mutual funds.

Source: Oracle Q4 Earnings Preview: 5 Numbers To Watch

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