Mon, Jun. 29, 6:15 PM
- Barclays has named enterprise software giant Oracle (NYSE:ORCL), glass giant Corning (NYSE:GLW), network processor/ARM server CPU vendor Cavium (NASDAQ:CAVM), and payment services provider Total System Services (NYSE:TSS) its top Americas tech picks.
- On Oracle: "Oracle is emerging from an extended period of product development and internal changes that position it well to capitalize on key tailwinds through 2016. With better execution in software and stabilization in hardware, we think investor sentiment will become more positive, specifically as quarterly results have been better, and the current valuation makes Oracle shares attractive." Shares are less than two weeks removed from selling off due to an FQ4 miss and light guidance.
- On Corning: "The launch of Gorilla Glass 4 has been successful and additional glass industry dynamics remain beneficial. Other new glass products highlight Corning’s ability to move with the market and compete with non-glass solutions over time. Capital allocation will remain a major component of the story and the company’s large share repurchase program (roughly $1bn remaining) and $0.48 annual dividend should lend support to the stock." Barron's made a bull case earlier this month.
- On Cavium: "CAVM’s base business is levered to strong end market growth trends within the security, wireless infra, and data center end markets, but we also see [addressable market] expansion through its Fusion-M (doubles base station content and likely drives share gains), Liquid IO (gen 2 ramps 2H15), 2/4 core Octeon (addresses FSL $500+ business), and Fusion (small cell) products. ThunderX (ARM server SoC) and XPliant (switch silicon) both add incremental $1bn+ TAMs with disruptive solutions. CAVM will likely need to weather one more quarter without real upside but multiple products are progressing toward material revenue in 2016." CLSA and Needham cited some of the same catalysts in bullish June notes.
- On TSS: "Despite recent accounts on file (AOF) wins (e.g., BMO, TD, BAC) TSS expects to be able to grow North American revenue by mid- to-high single digits organically on an annual basis over the longer term. Given strong drivers such as card transactions (Nilson projects transactions on cards to grow ~7% from 2013 to 2018), and AOF outsourcing trends, we see the implied 5-9% y/y longer-term growth guidance as achievable, particularly when combined with nominal GDP growth."
Mon, Jun. 29, 10:17 AM
- The Supreme Court has ruled Oracle (ORCL -0.4%) can press claims Google (GOOG -1%) infringed its copyrights by using Java APIs within Android, turning down a request by Google to hear the case. The dispute will now return to a lower court.
- Oracle has sought over $1B in damages. Though a district court jury cleared Google in 2012 of infringing 8 Oracle patents, it ruled Google infringed Oracle copyrights. A federal appeals court later declared Oracle's code is eligible for copyright protection, sending the case back to the district court. Google had appealed that decision to the Supreme Court.
- Google, backed by Yahoo, Red Hat, and HP, has argued granting Oracle's code copyright protection will prevent developers from building on top of past software innovations. Oracle, backed by Microsoft, EMC, and NetApp, has accused Google of plagiarizing its code.
- Update: Some more Google news: The EU is now giving Google until Aug. 17 to respond to antitrust charges. The WSJ recently reported the EU wants major changes to Google's shopping search rankings.
Tue, Jun. 23, 4:01 AM
- Oracle (NYSE:ORCL) is expanding its cloud-computing offerings, bringing the company into more direct competition with Amazon Web Services.
- "We're prepared to compete with Amazon on price," said Executive Chairman Larry Ellison in a webcast, after announcing that Oracle would offer online storage and capability for customers to run their applications entirely in the cloud.
- The company's cloud business is growing quickly, running at a rate of about $2.3B a year in revenue.
Thu, Jun. 18, 5:33 PM
- Dave Donatelli, the head of HP's enterprise hardware ops until being reassigned in 2013, has been named Oracle's (NYSE:ORCL) EVP of Converged Infrastructure. That puts him in charge of engineered systems, server, storage/tape, and networking hardware.
- Oracle's hardware systems revenue fell 4% Y/Y in FQ4 to $1.4B, with a strong dollar and ongoing SPARC server declines offsetting engineered systems growth. Engineered bookings were up double-digits.
- Meanwhile, the enterprise software giant received a handful of target cuts following its FQ4 miss and soft FQ1 guidance, but no downgrades. Bulls focused on healthy cloud growth, and bears on declining license revenue and the margin pressures caused by the cloud shift. Shares closed down 4.8%.
- Goldman's Heather Bellini (Buy): “We expect ORCL’s license results to continue to be pressured on a yoy basis,” writes Bellini. “However our field checks also confirm that the company’s competitiveness in the cloud has improved considerably over the last 12-18 months.” Her FY16 (ends May '16) EPS estimates has been cut by $0.24 to $2.66.
- FBR's Daniel Ives (Outperform): "While management blamed the weakness on currency, it is clear to us that the company continues to struggle with its cloud transition, secular headwinds, and lingering execution issues in the field ... While it would be easy for us to throw in the white towel ... we see some positive signs of cloud growth and ultimately believe that the 12c [database] product cycle could be a growth catalyst in FY16 as more customers adopt the cloud-centric platform."
- Citi's Walter Pritchard (Neutral): "[W]e do not have a great framework for cloud transition at Oracle and Q4 results raise concerns about profitability levels in SaaS/PaaS as it substitutes for license ... SaaS / PaaS gross margin deteriorated further and on 28% higher SaaS/PaaS revenue in 4Q15, ORCL gross profit was 14% lower."
- Prior Oracle coverage
Thu, Jun. 18, 9:22 AM
Wed, Jun. 17, 5:41 PM
- Continuing its recent custom, Oracle (NYSE:ORCL) has provided all of its FQ1 guidance (delivered on the FQ4 call) in constant currency, which backs out the impact of the dollar's rise.
- On a CC basis, the company forecasts 5%-8% FQ1 revenue growth and EPS of $0.56-$0.59; consensus in actual dollars is for 0.2% revenue growth and EPS of $0.61. Total software/cloud revenue is expected to grow 6%-8% in CC, and SaaS/PaaS revenue 39%-43%. For reference, forex had an 8% impact on FQ4 revenue growth, and a $0.09 impact on EPS.
- Trying to put a good face on Oracle's FQ4 performance, co-CEO Safra Catz highlighted the company's strong cloud software/services growth, and noted the shift to cloud subscriptions from licenses leads revenue recognition to be pushed out. SaaS/PaaS bookings rose over 200% Y/Y to $426M (said to top an internal target of $300M), and total cloud billings rose 78% to $834M. Traditional app and database license revenue (-17%) was at $3.1B during the quarter.
- Oracle is at $42.15 AH.
- FQ4 results, details, PR
- Previously: Oracle seen pricing aggressively against Workday
Wed, Jun. 17, 4:31 PM
- Oracle's (NYSE:ORCL) closely-watched software/cloud revenue rose 2% Y/Y in constant currency in FQ4 to $8.4B, towards the low end of a 1%-6% guidance range. In actual dollars, sales fell 6%.
- Segment performance: Hardware systems revenue rose 5% Y/Y in CC (guidance was -2% to +8%), and fell 4% in dollars to $1.4B. Within software/cloud, SaaS/PaaS (cloud app/app platform) revenue rose 29% in dollars to $416M, and IaaS (cloud infrastructure) revenue rose 25% to $160M. However, traditional software license revenue (hurt by the cloud shift) fell 17% to $3.1B (10% in CC). License update/product support revenue (driven by past deals) was flat at $4.7B, and other services fell 4% to $899M.
- Financials: Roughly $2B was spent on buybacks, even with FQ3. GAAP costs/expenses rose 5% Y/Y to $6.72B - sales/marketing -1% to $2.21B, R&D +6% to $1.44B, G&A +5% to $278M. Oracle ended FQ4 with $54.4B in cash/marketable securities (much of it offshore), and $42B in debt.
- Shares have fallen to $41.84 AH. Conference call at 5PM ET (webcast), guidance should be provided.
- FQ4 results, PR
Wed, Jun. 17, 4:02 PM
Tue, Jun. 16, 5:35 PM
Fri, May 29, 6:29 PM
- After tumbling on Wednesday in the wake of its FQ1 beat and in-line guidance, Workday (NYSE:WDAY) has continued trending lower. Shares fell 1.5% in regular trading today, hitting their lowest levels since Feb. 2.
- Though no downgrades have arrived, several sell-side firms have suggested tougher competition is hurting growth, with Oracle's (NYSE:ORCL) cloud HR/HCM software the biggest culprit. Jefferies' John DiFucci: "We believe Oracle (and to a lesser degree, SAP) has been behaving irrationally in the market for almost a year ... while it was likely aggressive prior to this, we believe it became even more aggressive doing almost anything to win deals from Workday."
- DiFucci sees a method to Oracle's madness. "This irrational behavior may not be so irrational since a loss to Workday is not only a loss of an HCM opportunity, but also a loss of Oracle infrastructure given Workday’s proprietary infrastructure architecture." However, he admits Oracle/SAP's HCM offerings (though improving) "still trail Workday by a meaningful margin."
- Likewise, Brean's Sarah Hindlian asserts HCM is "becoming incrementally more competitive, with material new pricing pressure from incumbents, while SaaS penetration of the market is maturing." She also thinks Workday's cloud financials software growth is slower than investors were expecting.
- Cowen's Jesse Hulsing is more positive, even if FQ1 billings were lighter than he forecast. "We are ... encouraged by the trend toward larger, blue chip HCM custs (Coca Cola, etc.) and a more bullish tone regarding the financials pipeline. PT to $101 and view the low $80s as attractive entry point, as we expect growth to improve moving forward."
- During Oracle's March FQ3 CC (transcript), Mark Hurd didn't pass up the chance to trash-talk Workday. "In the context of HCM, I think ... we have simply engineered now a better product than Workday ... we now win more than half the deals in the United States. Outside the United States, our win rate goes up actually exponentially because of the breadth of our distribution in those markets." Workday might beg to differ with those claims.
Fri, May 1, 3:44 AM
- Although declining to comment on whether Oracle (NYSE:ORCL) made an approach for Salesforce.com (NYSE:CRM), Oracle Chief Executive Safra Catz stated her company could benefit if Microsoft or another rival bought the customer relationship management firm.
- "It would cause a lot of disruption in that market and so I would view that as something that would be helpful to us especially in the short or medium term, dependent on who it was," Catz said.
- Oracle has spent more than $60B on more than 100 acquisitions in its 38-year history but is "not known to throw around money," she added.
- Previously: Report: Oracle didn't make a bid for Salesforce (Apr. 29 2015)
- Previously: Salesforce reportedly approached by potential buyer; shares +15.4% (Apr. 29 2015)
Wed, Apr. 29, 10:39 PM
- Following an afternoon Bloomberg report stating Salesforce (NYSE:CRM) has been approached by a potential acquirer, many have speculated archrival Oracle is the suitor. However, BuzzFeed's John Paczkowski (formerly with Re/code) reports Oracle (NYSE:ORCL) hasn't made such a move.
- Outside of Oracle, Microsoft (NASDAQ:MSFT) is the name that has popped up most often. The software giant (closed today with a $399B market cap) is large enough to swallow Salesforce, has relatively limited product overlap - its Dynamics CRM apps compete against Salesforce's apps, but generally with SMBs than enterprises - and has been hungry to grow its cloud exposure. It just set a target of nearly tripling its business cloud service revenue run rate by mid-2018.
- Also: Microsoft and Salesforce struck an Office 365-centered partnership last year. Salesforce CEO Marc Benioff showed up today at Microsoft's BUILD developer conference to trumpet the integration of additional Microsoft and Salesforce apps/services, and made a few tweets about the partnership along the way.
- Salesforce closed up 11.6% today thanks to Bloomberg's report, and then rose 1% in AH trading to $75.41. Many cloud software peers also got a lift.
Wed, Apr. 29, 2:50 PM
- Bloomberg reports Salesforce (CRM) has been approached by a potential acquirer, and is working with bankers to field offers. Shares have soared in response.
- With a current $51B market cap, only a handful of enterprise tech companies could afford to digest Salesforce. The short list includes Oracle ($197B market cap), Microsoft ($400B), IBM ($173B), and just maybe SAP ($94B). Oracle (NYSE:ORCL), which has made plenty of cloud software acquisitions, just launched a $10B debt offering.
- Update: BuzzFeed reports Oracle wasn't the company that approached Salesforce.
Wed, Apr. 29, 9:15 AM
- Looking to take advantage of a still-favorable climate for investment-grade corporate debt, Oracle (NYSE:ORCL) is selling $10B worth of notes broken into tranches respectively due 2022, 2025, 2030, 2035, 2045, and 2055. Their interest rates range from 2.5% for the 2022 notes to 4.375% for the 2055 notes.
- The enterprise software giant says it will use the proceeds for "general corporate purposes, which may include stock repurchases, payment of cash dividends on its common stock and future acquisitions." It has already been spending heavily on buybacks - $2B was spent in the February quarter - and hasn't been shy about making big acquisitions.
- Oracle had $43.8B in cash/short-term investments as of Feb. 28, and $32.3B in debt. Shares are down 0.3% premarket amid lower equity futures.
Sat, Apr. 25, 1:54 PM
- 95% of all Oracle (NYSE:ORCL) products will be available as cloud-based services by the time the company holds this year's Oracle OpenWorld conference in October, says co-CEO Mark Hurd. He asserts 65% of Oracle products are offered via the cloud today.
- Hurd: "We are still investing, very much in our traditional products. But that said, we are moving those products to now be available in the cloud at a really incredible pace ... We are not protecting, so to speak, anything."
- Oracle has rapidly fleshed out its cloud app (SaaS), app platform (PaaS), and infrastructure (IaaS) lineup over the last 3 years through a mixture of acquisitions and internal product launches, with the goal of keeping clients from abandoning Oracle for either the offerings of cloud-focused rivals (e.g. Salesforce, Workday) or those of fellow IT giants making their own large cloud investments (e.g. SAP, Microsoft, IBM).
- Though Oracle faces a tough sell with Internet firms and startups that have eschewed its offerings (often for some mixture of Amazon Web Services, open-source software, and apps from cloud-only upstarts), it's gaining traction within its core enterprise base: The company's SaaS/PaaS revenue rose 30% Y/Y in the February quarter to $372M, and its IaaS revenue rose 28% to $155M. At the same time, traditional software license revenue fell 7% to $1.98B (forex was a headwind).
- In a recent note, D.A. Davidson (Buy, $51 target) reported its research indicates Oracle's SaaS/PaaS offerings "continue to gain customer traction and mindshare, particularly in Europe," where the company faces less competition from upstarts. "Most ... pure play SaaS vendors are in earlier stages of building the distribution and channel partnerships needed to succeed longer term in this geography."
Mon, Mar. 30, 9:35 AM
- Citing optimism about the company's cloud growth and a belief Oracle 12c demand will spark a pickup in database sales, RBC has upgraded Oracle (ORCL +1.3%) to Outperform, and hiked its target by $2 to $50.
- Oracle is coming off a February quarter (FQ3) where its cloud SaaS/PaaS revenue rose 30% Y/Y to $372M and its cloud IaaS revenue 28% to $155M, while its traditional software license revenue (including databases) fell 7% to $1.98B due to the impact of cloud software adoption (Oracle's or otherwise).
- On the FQ3 CC (transcript), Larry Ellison was his usual optimistic self when talking about 12c, its support for multiple database tenants and an in-memory option (meant to counter SAP's Hana) "driving 12c adoption to higher rates than anything we've seen in about – for a very, very long time."
- Previouly: FBR praises Oracle's "one-stop shop" database approach
- Previously: Amazon goes after Oracle with Aurora database
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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