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Wed, Jan. 6, 11:29 AM
- Believing Oracle's (ORCL +1%) valuation now reflects a high level of database pessimism and that cloud subscription revenue growth will surpass software license declines in FY17 (ends May '17), Evercore's Kirk Materne has upgraded Oracle to Buy. His target remains $44.
- Materne expects shares to re-rate in the coming quarters as estimates bottom. The call comes three weeks after Oracle sold off in response to the soft FQ3/FQ4 guidance provided with mixed FQ2 results. Total software/cloud revenue is forecast to rise just 3%-4% and 1%-3% Y/Y in constant currency in FQ3 and FQ4, as strong SaaS/PaaS cloud growth (49%-53% and 55%-59%, respectively) is offset by license declines.
- Separately, Oracle has announced the acquisition of AddThis, a company that provides both social sharing, content recommendation, and personalized marketing tools for Web publishers, and audience data and analytics services for brands/ad agencies that leverage data provided by the publisher tools. Sources speaking with TechCrunch suggest Oracle paid $100M-$200M.
- Oracle asserts AddThis' publisher tools power 15M sites, and suggests the company's offerings will be added to its Data Cloud platform, which provides companies and marketers with a slew of tools for measuring and analyzing consumer audiences to help with ad targeting and content personalization.
- The company has previously bought online-to-offline data provider Datalogix, cloud marketing data services provider BlueKai, online ad campaign software firm Maxymiser, and cloud marketing automation software firms Eloqua and Responsys, as it battles the likes of IBM, Adobe, and Salesforce in the ad tech software/services space.
Dec. 31, 2015, 7:03 PM
- Cisco (NASDAQ:CSCO) could make a bid for storage array vendor NetApp (NASDAQ:NTAP) and threat-prevention hardware/software provider FireEye (NASDAQ:FEYE) in 2016, thinks FBR's Dan Ives. Cisco/NetApp speculation has been around for a while. Meanwhile, Cisco has made several security acquisitions in recent years, and appears to be up for more, but has also launched products that compete with FireEye.
- Ives also thinks IBM could bid for machine/log data analytics software leader Splunk (NASDAQ:SPLK) and business intelligence/data visualization software firm QLIK. With a $7.6B market cap and high multiples, Splunk would be a costlier acquisition than IBM's traditional fare.
- HP Enterprise (NYSE:HPE), meanwhile, is seen as a potential suitor for both Qlik and enterprise cloud storage/file-sharing leader BOX. And Oracle (NYSE:ORCL) a potential buyer of cloud ERP, HR, and e-commerce software firm NetSuite (NYSE:N). Larry Ellison owns a large stake in NetSuite (more SMB-focused than Oracle), and the company both competes and partners with Oracle.
- Microsoft (NASDAQ:MSFT), which has made plenty of acquisitions in the Satya Nadella era, is seen as a potential buyer of database security software and Web app firewall vendor Imperva (NYSE:IMPV), as well as of cloud vulnerability management and compliance software firm Qualys (NASDAQ:QLYS). Symantec (NASDAQ:SYMC), which has signaled it will make security acquisitions after the sale of its Veritas unit closes, is considered a possible acquirer of e-mail/compliance security software provider Proofpoint (NASDAQ:PFPT).
- Yesterday: FBR sees improving cybersecurity spend, likes several stocks
Dec. 17, 2015, 2:11 PM
- Oracle (ORCL -5.1%) has dropped to within $2 of a 52-week low of $35.14 after issuing somewhat soft FQ3/FQ4 guidance to go with mixed FQ2 results. A handful of firms have cut targets, but no downgrades have arrived.
- Like other analysts, Wedbush's Steve Koenig (Neutral, $40 target) observes Oracle's FQ2 EPS beat stemmed from a lower-than-expected tax rate of 20.4%. He calls the headline results "fairly solid," but adds net billings fell 8% Y/Y (in spite of SaaS/PaaS strength) and remains worried about the impact of a mix shift towards cloud revenue on margins.
- Morgan Stanley's Keith Weiss (Equal-Weight, $45 target) is still optimistic Oracle will generate more revenue from cloud software deals - he roughly estimates 70% more over a 10-year span - than on-premise deals, but (echoing past concerns) still has concerns about their bottom-line impact. Weiss also questions the ability of Oracle's IaaS (cloud infrastructure) business to compete with much larger rivals such as Amazon and Microsoft.
- Credit Suisse's Philip Winslow (Outperform, $50 target) is still a believer. He notes Oracle sees SaaS/PaaS gross margin rising to 60% from FQ2's 43% as more billings convert to revenue, and sees cloud growth, sales productivity improvements, in-memory database adoption, and engineered systems demand acting as potential catalysts.
- Oracle currently trades for 14x a pre-earnings FY16 (ends May '16) EPS consensus of $2.60.
- Prior Oracle coverage
Dec. 16, 2015, 5:36 PM
- On a constant currency basis, Oracle (NYSE:ORCL) has guided on its FQ2 call (webcast) 0%-3% Y/Y FQ3 revenue growth, and EPS of $0.63-$0.66. Consensus in actual dollars is for -0.6% revenue growth and EPS of $0.65. Forex is expected to have a 4% impact on revenue growth, and a $0.03 impact on EPS (less than FQ2's 6% and $0.06).
- The company has also set FQ4 guidance (also in constant currency) for 1%-3% revenue growth and EPS of $0.83-$0.86.
- With SaaS/PaaS billings growth have steadily exceeded revenue growth in recent quarters - FQ2 SaaS/PaaS billings were up 68% in dollars vs. revenue growth of 34% - constant currency SaaS/PaaS revenue growth is expected to increase to 49%-53% in FQ3, and 55%-59% in FQ4.
- Total software/cloud revenue is expected to be up 3%-4% in FQ3, and 1%-3% in FQ4. IaaS revenue growth is expected to be up just 3%-7% in FQ3, and 1%-5% in FQ4. Cloud-related capex is expected to be lower in FY16 than in FY15.
- In other news, Oracle has added Renee James, until recently Intel's president, to its board. The company now has 13 directors.
- Shares have given back the after hours gains initially seen following Oracle's FQ2 report, and are now nearly unchanged.
- Oracle's FQ2 results, details
- Update (5:49PM ET): Oracle is now down 1.6% after hours to $38.28.
Dec. 16, 2015, 4:52 PM
- Though Oracle (NYSE:ORCL) missed FQ2 sales estimates (while beating on EPS), its on-premise software + cloud revenue (closely watched) rose 2% Y/Y in constant currency, putting it at the high end of a 0%-2% guidance range. In actual dollars, software/cloud revenue fell 4% to $7B. Forex had a 6% impact on total revenue growth (-6% vs. 0%).
- Software/cloud performance: On-premise revenue fell 7% to $6.4B; cloud rose 26% to $649M. Within on-premise, software license sales (drives future update/support revenue, hurt by the cloud shift) fell 18% to $1.68B, and license update/product support revenue fell 2% to $4.68B. Within cloud, SaaS/PaaS (cloud apps and app platforms) revenue rose 34% to $484M, and IaaS (cloud infrastructure) 7% to $165M.
- Other businesses: Hardware revenue fell 16% to $1.12B (declining UNIX server sales and weak enterprise It spend), with hardware products dropping 20% t $573M and hardware support 11% to $550M. Services revenue (not counting hardware/software support) fell 8% to $861M.
- Financials: Boosting EPS: ~$3.4B was spent on buybacks, up from ~$2.8B in FQ1. GAAP costs/expenses were flat Y/Y (up 5% exc. forex) to $6.04B - sales/marketing spend rose 3% to $1.95B, R&D 4% to $1.44B, and G&A 5% to $285M. SaaS/PaaS costs 70% to $280M. Oracle ended FQ2 with over $52B in cash (much of it offshore), and nearly $42B in debt.
- Oracle still expects to "sell and book" over $1.5B worth of SaaS/PaaS business in FY16 (ends May '16). Conference call at 5PM ET (webcast), guidance should be provided.
- ORCL +2.4% after hours to $39.84.
- Oracle's FQ2 results, earnings release
Dec. 16, 2015, 4:31 PM
Dec. 15, 2015, 5:35 PM
Nov. 20, 2015, 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."
Nov. 16, 2015, 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
Nov. 11, 2015, 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.
Oct. 29, 2015, 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.
Oct. 28, 2015, 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.
Oct. 19, 2015, 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.
Oct. 14, 2015, 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.
Sep. 16, 2015, 5:36 PM
Sep. 16, 2015, 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
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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