Oracle leaps to record as cloud transition hits turning point

Oracle Corp. was late to the cloud revolution, allowing upstarts like Inc. to find significant market share with software delivered over the internet, and has suffered while making an acquisition-fueled push into the space.

The Band-Aid appears to have come off Oracle’s wound, however, and the company seems assured that its healed finances will be better than ever. Investors showed belief after Oracle’s fiscal fourth-quarter earnings report Wednesday evening, sending shares that had never cracked $47 in regular trading, adjusted for splits, to more than $51 in after-hours action. If that move holds, Oracle would be worth more than $200 billion.


ORCL, +8.98%

 profit and revenue had declined in each of its previous two fiscal years, after a steady yearslong climb. That is not surprising in a transition to cloud, as software companies trade large one-time payments for boxed software for long-term contracts paying out monthly fees spread out over the term.

This is especially true in Oracle’s case, as naysayers believe the company was mostly converting its large customer base into cloud buyers, effectively trading one form of payment for another. Executives on Wednesday, though, crowed about new customer wins, as well as convincing companies to sign on to more than just software-as-a-service but also its cloud computing and full platform offerings as well.

Co-Chief Executive Mark Hurd noted that about two-thirds of customers buying Oracle’s cloud Enterprise Resource Planning Software in the quarter were new customers, and ticked off a long list of companies Oracle has signed up. Founder and Chairman Larry Ellison noted that new customers are easier to convince on the cloud, leaving a lot of potential wins among its existing, on-premises customer base.

“We have seen our existing base move, they just…move slower than what the new logos have,” Ellison said in Wednesday’s conference call. “I actually think this is a good thing because I believe that we will get all of our existing customers on-prem, roughly speaking, moving to our cloud infrastructure over time.”

By handily beating expectations in the fourth quarter of its fiscal year, Oracle posted full-year revenue growth of 1.8% and profit growth of 4.9%, on a GAAP basis. Co-CEO Safra Catz projected growth would jump even more in the current fiscal year, which began June 1, calling for full-year sales growth of 4% to 6% and sticking with her prediction that earnings per share would grow by a double-digit percentage, on an adjusted and constant-currency basis.

“We will have less drag from the transition and the base will continue to grow, so this should really accelerate,” Catz said in Wednesday’s call.

Even with annual gains and promises for more, Oracle’s cloud transition is a work in progress. Total cloud revenue in the fourth quarter was $1.36 billion, while on-premises software accounted for $7.5 billion, and Oracle just instituted new reporting segments Wednesday that better reflect its changed business.

Oracle’s cloud-computing business is still young and small, with plenty of competition from entrenched players like Inc.’s

AMZN, -0.04%

 Amazon Web Services and Microsoft Corp.’s

MSFT, +0.11%

 Azure. Software upstarts that flourished as Oracle refused to believe in cloud delivery, like former Oracle exec Marc Benioff’s Inc.

CRM, +1.12%

 , have developed strong customer bases and ecosystems.

Oracle’s transformation is far from over, but the company has now proven that it can boost revenue and profit while focusing on cloud. The forecast for the 2018 fiscal year suggests it will top, or at least rival, the record revenue and profit it found in 2014, before growth stalled. That should be enough to pacify Oracle investors who have been waiting for growth to return, and possibly entice others who see a much lower price-to-earnings ratio than cloud natives like Salesforce.

Prior to the results, Oracle’s stock had run up 20.5% year to date, while the Nasdaq 100 Index

NDX, +0.03%

 had climbed 18.9% and the SP 500 index

SPX, +0.02%

 had gained 8.8%.

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Amazon accuses Walmart of bullying in cloud computing clash

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Walmart said there were cases in which it would not want its data on Amazon’s cloud computing platform

Walmart, the US’s biggest retail chain, has been accused of trying to coerce its technology suppliers into shunning Amazon’s cloud computing service.

Amazon has accused its rival of attempting to “bully” the IT companies into picking a rival platform.

The row follows a report by the Wall Street Journal, which said other unnamed large retailers had also asked vendors to shun Amazon Web Services.

The row comes at a time Amazon is expanding its shopping operations.

Last Friday, the Seattle-based business announced a $13.7bn (£10.8bn) takeover of the groceries chain Whole Foods.

And this week it revealed it had struck a deal with Nike to sell the sportswear-maker’s shoes directly, and that it was launching Prime Wardrobe – a service that lets customers order and try clothes for seven days before deciding which to buy and keep.

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AWS was the most profitable part of Amazon’s business in the last quarter

Amazon’s Web Services division may not be as well known to the public as the company’s retail operations, but it is a huge money-earner.

In April, the company reported the unit had generated $3.7bn in sales over the previous three months.

The business provides computing power, online storage, security protection and developer tools to third parties.

Its clients include Netflix, Airbnb, General Electric and the CIA.

According to market research company Gartner, AWS leads the market in its field.

However, Walmart uses Microsoft’s rival Azure service.

A spokesman for Walmart acknowledged it had concerns about its suppliers’ use of AWS.

“Our vendors have the choice of using any cloud provider that meets their needs and their customers’ needs,” he said.

“It shouldn’t be a big surprise that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform.”

Amazon suggested this approach was misguided.

“We’ve heard that Walmart continues to try to bully their suppliers into not using AWS because they have an incorrect view that AWS is somehow supporting Amazon’s retail business,” said a spokesman.

“Plenty of suppliers are standing up to Walmart and refusing to be told that they can’t use [us].

“Tactics like this are bad for business and customers and rarely carry the day.”

AWS’s use of encryption means that its own staff cannot peer into the data stored on its computer servers by its customers.

But one analyst said it was still understandable Walmart and others might not want to help send business its way.

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Amazon’s takeover of Whole Foods provides it with the supply chain to expand its grocery operations

“AWS is a separate part of Amazon’s business, but ultimately this comes back to being frightened of being disrupted, especially in light of the recent acquisition of Whole Foods,” said Nick McQuire, from the consultancy CCS Insight.

“The question is whether this fear now will cause a wider backlash among retailers, where you get many within the community switching from using AWS in the cloud to Google, Microsoft or someone else.”

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