Fri, Nov. 20, 3:56 PM
- "We think it’s reasonable to surmise that Oracle’s (NYSE:ORCL) push to blunt Workday’s (WDAY -1.4%) momentum in its PeopleSoft base is having some impact, or at least lengthening Workday’s sales cycles as per our integrator checks," writes Wedbush's Steve Koenig, downgrading the cloud HR/financials software leader to Neutral after it offered light FQ4 guidance to go with an FQ3 beat. His target has been cut by $15 to $84.
- Koenig, whose remarks come six months after Jefferies reported Oracle is pricing aggressively against Workday, also calls FQ3 revenue (though above consensus) "somewhat disappointing," and notes subscription revenue growth has dropped to 48% Y/Y from Q1's 63%. He adds Workday has been offering more flexible payment terms to counter Oracle, and that this is expected to "result in a three-point headwind to fourth-quarter subscription revenue and five points next year," before normalizing in FY18 (ends Jan. '18).
- William Blair's Justin Furby (Outperform) is less troubled by Workday's FQ4 outlook, noting the subscription shortfall is solely the result of payment term changes and that management often guides conservatively. He adds Workday originally guided for "no more than 40%" FY16 sales growth, and is now on track to post 47%+ growth.
- On its earnings call (transcript), Workday said it's "building our investment and hiring models assuming total revenue growth of above 30% for fiscal 2017." Consensus is for 37.2% growth.
- Drexel Hamilton's Brian White (Buy) is pleased with growing financials software traction, as well as the recent unveiling of several other apps (Learning, Planning, Payroll, Insight Applications). Wunderlich's Rob Breza (Hold) isn't as impressed. "Conf.call highlights focused on the Financials offering, with ~90 customers live vs. 80 in the prior quarter, which is likely to leave investors feeling uninspired. Investors are left waiting for meaningful Financials acceleration to offset the HCM deceleration as new HCM products reach [general availability] in 2H16."
Mon, Nov. 16, 9:32 AM
- Stating checks indicate cloud revenue growth will accelerate in the second half of FY16 (end May '16), Goldman's Heather Bellini has added Oracle (ORCL +1.1%) to her firm's Conviction Buy list, and set a $47 target.
- Bellini: "ORCL shares are down 17% ytd (vs -2% for the S&P) as investors continue to have concerns on the company’s ability to shift to the cloud as well as how this shift will impact its financial profile. Specifically, we believe the market has considerable doubts about its cloud (SaaS/PaaS) FY16 (May) revenue growth guidance of 50%, its gross margin target for this segment of 60%, as well as its bookings target of $1.5 - $2.0bn ... We see our thesis evolving over the next three quarters, with the first evidence becoming clearer on its F2Q16 earnings print (expected in mid-Dec) as guidance should demonstrate that promotional pricing is winding down, and customers are renewing at higher levels of [annualized recurring revenue]."
- She adds success in attaining FY16 bookings targets could lead management to guide for accelerating FY17 cloud revenue growth, and that FY16 is will "mark the bottom" for Oracle's op. margin (recently pressured by the cloud shift).
- Oracle has already signaled cloud revenue growth will accelerate in FY16 as bookings convert to revenue. Bellini's move comes after Morgan Stanley, JMP, and Pac Crest downgraded Oracle, while citing concerns about the impact of cloud adoption on margins and/or traditional app/database sales.
- Last month: Oracle unleashes barrage of new cloud apps/services at OpenWorld
Wed, Nov. 11, 9:24 AM
- Believing "the 12c database cycle has yet to materially ramp up and provide support to software license revenue growth," and that “recent data points have given investors increasing cause for concern around the durability of the core database business," Morgan Stanley's Keith Weiss has downgraded Oracle (NYSE:ORCL) to Equal-Weight, and set a $45 target.
- Weiss adds healthy cloud bookings - SaaS/PaaS bookings rose165% Y/Y in the August quarter to $191M - "failed to drive the multiple expansion we've seen in other cloud transition stories." He attributes this to a lengthy timetable for turning cloud bookings into revenue growth, a larger-than-expected impact from the cloud shift on Oracle's bottom line, and a lack of clarity regarding the "depth and duration" of the impact.
- He sees cloud revenue growth beginning to increase in the February quarter (FQ3), but notes cloud sales remain less than 5% of total revenue. On the other hand, Weiss still expects a 10%-12% total return for shareholders, thanks to modest spending growth, ongoing buybacks, and a 1.6% dividend yield.
- ORCL -1.9% premarket to $39.20. Pac Crest and JMP downgraded last month month, with both citing cloud-related concerns.
Thu, Oct. 29, 1:21 AM
- As expected, Oracle (NYSE:ORCL) has used its annual OpenWorld conference to roll out new cloud infrastructure (IaaS) services meant to put it on better footing against Amazon, Microsoft, IBM, and a slew of other rivals when battling for enterprise accounts.
- The offerings include the ability to choose between pay-as-you-go and dedicated compute capacity (long supported by many rivals), storage services focused on file-sharing and archived data, support for Docker containers, and high-performance connectivity options for interacting with customer data centers. Among these is support for direct links between Oracle's cloud and facilities owned by major data center owner Equinix in six markets.
- Oracle's IaaS revenue rose 16% Y/Y in the August quarter to $160M. However, that's a small fraction of the $2.09B in revenue (+78% Y/Y) claimed by IaaS leader Amazon Web Services in Q3. HP recently bowed out of the public IaaS market, while VMware and parent EMC recently pooled their IaaS assets into a JV under the Virtustream brand. The rapid growth of Amazon's database services - they're now on a $1B/year run-rate, and support several database platforms - is viewed as a long-term threat to Oracle's mainstay database business.
- Also launching: A Data Visualization Cloud Service that targets a fast-growing market for analytics tools that can be used by non-IT workers. Rivals in this space include Microsoft, Qlik, Tableau, and more recently Amazon and SAP. Oracle claims tight integration with its existing analytics offerings, and support for many Oracle and non-Oracle data sources.
- Other new cloud offerings: 1) New high-reliability features for Oracle's cloud database services, as well as a service for running databases and data warehouses on Oracle's Exadata systems. 2) Management Cloud, a set of apps for monitoring app performance, analyzing log data, and overseeing a company's IT infrastructure. 3) New services for creating Java-based cloud apps. 4) New apps and features for Oracle's cloud ERP software suite, including three supply chain management apps.
- Oracle's cloud app and app platform (SaaS/PaaS) business is much larger than its IaaS business: SaaS/PasS billings rose 70% Y/Y in the August quarter to $592M. Traditional software license revenue fell 16% to $1.15B.
Wed, Oct. 28, 4:25 PM
- Equinix (NASDAQ:EQIX) is off 2% in choppy trading after hours in the wake of posting Q3 results where revenues and FFO grew solidly though EPS fell short of consensus.
- Adjusted FFO was up to $210.4M, but net income came to $0.71/share vs. an expected $1.11. Revenues were up 10.7% Y/Y and up 3% sequentially. Recurring revenues (co-location, interconnection, managed services) were up 10% Y/Y to $646.7M.
- Gross margins were 53% compared to a year-ago 51%.
- The company also announced a deal with Oracle (NYSE:ORCL) to bring Oracle's Cloud services to six global markets via the Equinix Cloud Exchange: Amsterdam, Chicago, London, Singapore, Sydney and Washington, D.C. Cloud is the fastest-growing part of Oracle's business, supporting 62M users and 23B transactions a day.
- Equinix is guiding to Q4 revenues of $701M-$705M vs. consensus of $701M. It expects Q4 EBITDA of $328M-$332M vs. an expected $327M. It sees full-year 2015 revenues of $2.696B-$2.7B, above consensus of $2.693B, and EBITDA of $1.267B-$1.271B, above an expected $1.26B.
- Conference call to come at 5:30 p.m. ET.
- Press Release
Mon, Oct. 19, 11:27 AM
- Arguing the transition to cloud subscriptions will have a larger impact on near-term license/maintenance revenue than previously forecast, Pac Crest's Brendan Barnicle has downgraded Oracle (ORCL -1.9%) to Sector Weight.
- Barnicle's FY16 (ends May '16) revenue and EPS estimates have respectively been cut by $800M and $0.14 to $37.2B and $2.56. Consensus is at $37.8B and $2.62. In September, Oracle guided for 3%-4% FY16 constant currency software/cloud revenue growth, with SaaS/PaaS cloud revenue rising 50% and on-premise software revenue rising 0%-1%.
- JMP downgraded last week on concerns about growing competition from Amazon. Shares are less than $2 away from a 52-week low of $35.14.
- In other news, Oracle says it now has over 1,300 customers (only 300+ in production for now) for its cloud ERP apps. Clients include Athenahealth, Evite, and Irving Materials.
- NetSuite (N +0.7%) is a major player in the SMB cloud ERP software space. Meanwhile, on-premise ERP giant SAP made its core apps available via cloud subscriptions last year. Large enterprises have generally been more cautious about adopting cloud ERP apps than they have been about adopting cloud CRM and HR apps.
Wed, Oct. 14, 10:26 AM
- A day after downgrading VMware on fears Amazon Web Services (AWS) will take a toll, JMP's Patrick Walravens has done the same for Oracle (ORCL -1.1%), cutting shares to Underperform and setting a $31 target.
- Walravens notes AWS recently disclosed its database business is on a $1B/year run rate, and has seen 127% Y/Y usage growth. Amazon (NASDAQ:AMZN) is 11 months removed from launching a "commercial-grade" database (known as Aurora) that targeted Oracle, and a week removed from unveiling a database migration service and storage transfer appliance for enterprises looking to move workloads to AWS.
- He adds there's "increasing customer dissatisfaction" with Oracle's pricing and auditing policies (previous), and that some of Oracle's cloud deals stem from major sales incentives and "may not go live."
- Separately, Oracle has been awarded $50M in a copyright infringement lawsuit against Rimini Street, a provider of 3rd-party maintenance/support services for companies using Oracle and SAP's software. Oracle had sought $245.9M; Rimini, which might appeal, argued it should only pay $10M.
- The legality of Rimini Street's services wasn't on trial, and Rimini insists the suit covered "processes no longer in use." Oracle's ongoing battle with Rimini has been closely watched due to the potential of 3rd-party firms to eat into Oracle and SAP's cash-cow maintenance/support businesses. Oracle's license update/product support revenue totaled $4.7B in the August quarter, or 56% of revenue.
Wed, Sep. 16, 5:36 PM
Wed, Sep. 16, 5:29 PM
- On a constant currency basis, Oracle (NYSE:ORCL) expects FQ2 revenue to be down 2% to up 1% Y/Y, and EPS to be in a range of $0.63-$0.66 - forex is expected to have a 6% impact on revenue growth, and a $0.05 impact on EPS. Consensus in actual dollars is for -0.6% revenue growth and EPS of $0.65.
- Total software and cloud revenue is expected to be flat to up 2% in constant currency. SaaS/Pass revenue is expected to grow 36%-40%, and IaaS revenue 5%-9%.
- For the whole of FY16 (ends May '16), Oracle expects 3%-4% CC software/cloud revenue growth, 50% SaaS/PaaS growth, and 0%-1% on-premise software (licenses + update/support revenue) growth.
- Strong bookings are expected to lead SaaS/PaaS revenue growth to accelerate as FY16 progresses - bookings were up 165% in FQ1 in CC, leading dollar-based billings to rise 70% (well above 34% revenue growth).
- ORCL -2.4% after hours to $37.35.
- FQ1 results, details
Wed, Sep. 16, 4:24 PM
- Oracle's (NYSE:ORCL) cloud + on-premise software revenue totaled $6.5B in FQ1, -2% Y/Y in dollars and +6% in constant currency; guidance was for 6%-8% CC growth.
- Top-line performance: SaaS/PaaS (cloud app and app platform) revenue rose 34% in dollars to $451M and 38% in CC, slightly missing guidance for 39%-43% CC growth. Traditional software licenses (hurt by cloud adoption) -16% to $1.15B. Software license update/product support (driven by past deals) -1% to $4.7B. Hardware -3% to $1.1B; products -1%, support -5%. IaaS (cloud infrastructure) +16% to $160M. Services +1% to $862M.
- Americas revenue rose, while EMEA and Asia-Pac (hurt by forex) fell. A strong dollar had a 9% impact on total revenue growth (-2% vs. +7%). SaaS/PaaS bookings are said to be growing at more than a 150% Y/Y clip, which leads Oracle to reiterate it expects $1.5B-$2B worth of FY16 (ends May '16) SaaS/PaaS bookings.
- Financials: $2.8B was spent on buybacks, helping EPS beat estimates in spite of a revenue miss. Thanks to forex, GAAP costs/expenses rose a modest 3% Y/Y to $5.8B - sales/marketing spend totaled $1.7B (+1%) and R&D $1.4B (+5%). Oracle ended FQ1 with $55.9B in cash/investments (much of it offshore), and $42.1B in debt.
- ORCL -0.6% after hours to $38.01. Earnings call at 5PM ET (webcast), guidance should be provided.
- FQ1 results, PR
Wed, Sep. 16, 4:02 PM
Wed, Sep. 16, 9:32 AM
- Citing increasing cloud opportunities and a favorable valuation, SunTrust has upgraded Oracle (ORCL] +0.3%) to Buy ahead of this afternoon's FQ1 report, and set a $48 target.
- Oracle is down 15% since missing FQ4 estimates, reporting 2% Y/Y constant currency software/cloud revenue growth, and offering light EPS guidance on June 17. Shares go for 14x an FY16 (ends May '16) EPS consensus of $2.71.
- Update: More details on SunTrust's upgrade here. Analyst John Rizzuto: "[W]e believe that enterprises will increase their technology spending as they adopt cloud solutions, giving Oracle a unique opportunity as a consolidator. ... Importantly, it has re-architected and designed its middleware and database platforms to be more readily extensible to the cloud. We believe this will prove to be a critical differentiator within its customer base. Oracle, like only one or two others, is in a position to transition its customers to the cloud rather than causing disruption in cloud adoption."
Tue, Sep. 15, 5:35 PM
Mon, Sep. 14, 11:15 AM
- With market eyes on a Fed rate-hike decision considered to be a bit of a toss-up amid differing opinions, Goldman Sachs is banking on the (slightly) more dovish position that the agency will wait until December. The bank is still laying out how to play the hike when it invariably comes.
- Strength in balance sheets is what you need, it says, noting that those companies outperform (by an average 5%) in the three months after a rate-boosting cycle begins. In Goldman's "High Quality Stock" basket: CMG, DLTR, PEP, KMI, BLK, GOOG, AAPL, PCLN, ORCL, WFC.
- Meanwhile, it suggests avoiding companies with high floating-rate debt as they bear the brunt of a move away from near-zero interest rate policy. "When the tightening cycle finally starts, the immediate impact will be felt by firms with high proportions of variable rate borrowing."
- Included in that "avoid" list: CL, COL, JNJ, AAPL, EBAY, MET, KO, GIS, F, MCD, GM, TWX, CVX, AGN, MON.
- (Yes, cash-rich Apple made both lists, having a strong balance sheet along with floating debt.)
Thu, Aug. 20, 2:35 PM
- Maxymiser provides cloud software for testing and personalizing online/mobile ad campaigns, as well as analyzing customer demographics to improve targeting. Clients include HSBC, Allianz, Epson, Wyndham, and Calvin Klein.
- Oracle (ORCL -1.8%) is buying Maxymiser for an undisclosed sum, and plans to add the company's offerings to its Marketing Cloud platform. In a presentation (.pdf), the company claims Maxymiser "optimizes over 20 billion customer experiences per month for more than 250 prominent brands," and asserts its "Maxymiser’s capabilities in web and mobile channels complement Oracle Marketing Cloud’s strengths in email, SMS, social, push messaging, and display-advertising channels."
- Past Oracle marketing/CRM acquisitions: Datalogix (online/offline data), BlueKai (marketing data management), Eloqua (cloud marketing automation), Responsys (ditto), Vitrue (social media marketing), Collective Intellect (ditto)
- Yesterday: Citi estimates Oracle's cloud software ROI relative to traditional licenses
Wed, Aug. 19, 7:14 PM
- An analysis done by Citi's Walter Pritchard (Neutral, $42 target) indicates Oracle (NYSE:ORCL) needs 5 years to generate as much from cloud subscription sales for financials software as it does from traditional up-front licenses, assuming the licenses are discounted by 33% and cloud sales are done at list prices. For HR/HCM and CRM software, the breakeven points respectively rise to 8 and 10 years.
- Cloud database sales fare better in the analysis, with an estimated breakeven time of 2-5 years. Nonetheless, Pritchard concludes Oracle's management is "too optimistic on profitability of the cloud business."
- Oracle's FQ4 (May quarter) numbers had already led Pritchard and other analysts to fret about the margin pressures caused by the cloud transition. Jefferies has reported Oracle is pricing its cloud HR/HCM offerings aggressively to take share from market leader Workday, and Business Insider has reported Oracle has begun using the "nuclear option" of issuing breach-of-contract notices to clients - if enforced, such notices can require a client to stop using Oracle's software in 30 days - to get them to buy cloud subscriptions.
- The transition's effects: Oracle's SaaS/PaaS cloud revenue rose 29% Y/Y in FQ4 to $416M, while its traditional license revenue fell 17% (10% exc. forex) to $3.1B.
Oracle Corporation develops, manufactures, markets, hosts and supports database and middleware software, application software, cloud infrastructure, hardware system including computer server, storage and networking products and related services.
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