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Oracle’s cloud gamble pays off

Thu 16 Mar 2017

Oracle cloud

In its third-quarter financial statement, Oracle Corporation announced better than expected earnings, showing that the decision to focus on cloud business has so far been a success.

Total revenues reported were up 2% from last year, to $9.2 billion. This increase appears to be largely due to cloud business, as Software as a Service (SaaS) and Platform as a Service (PaaS) combined revenues increased by 73% over last year, topping $1 billion of the total revenue numbers.

Factoring in Oracle’s Infrastructure as a Service (IaaS) business brings the total cloud revenues to $1.2 billion dollars.

Over the past 18 months, Oracle changed their primary business model to focus on cloud offerings. In 2015, the company sold off $426 million in software and platform services in order to focus developing its cloud businesses. A strategic alliance with Fujitsu brought Oracle’s cloud services to customers in Japan.

This past year, the company strengthened IaaS and PaaS offerings with the acquisitions of Dyn and NetSuite. And just last month, Oracle expanded cloud offerings to three new regions in the UK, U.S. and Turkey, with APAC, the Middle East, and North America to follow next year.

Oracle co-CEOs Safra Catz and Mark Hurd attribute the positive third-quarter results primarily to growth in Oracle’s cloud business. Mr. Hurd added: “Over the last year, we sold more new SaaS and PaaS than Salesforce.com, and we’re growing more than 3 times faster. If these trends continue, where we are selling more SaaS and PaaS in absolute dollars AND growing dramatically faster, it’s just a matter of when we catch and pass Salesforce.com in total cloud revenue.”

Oracle CTO and co-founder Larry Ellison said that Infrastructure as a Service will be important to future business at Oracle as well, pointing out that the second-generation IaaS will become a significant competitor to Amazon Web Services in terms of both speed and cost. Additionally, he noted that Oracle’s largest customers need to manage Oracle database workloads in the Oracle Cloud, a capability that Amazon does not currently have.

On a conference call with investors to discuss the earnings results, Mr. Ellison said: “We have a very large database business. There are millions of applications that run on the Oracle database. Most will move to the cloud, and we think we have a huge technology lead over Amazon and Azure.”

On the strength of the third quarter financial numbers, Oracle increased quarterly dividends by 27% to $0.19 per share.


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