Can Oracle Buy Its Way In Its Effort To Win Over Amazon? – Oracle Corporation (NYSE:ORCL)

Oracle (NYSE:ORCL) has had a number of tough quarters within the latest previous. Analysts are concerned that it’s taking longer than expected to deliver on the cloud strategy. The not too long ago-introduced outcomes appeared to dispel a few of the issues as Oracle managed to surpass cloud-based mostly income expectations.

Oracle’s Financials

Revenue for the second quarter was flat over the 12 months and recorded a 2% development over the 12 months on fixed forex foundation to $9.56 billion. The market was on the lookout for revenues of $9.54 billion for the quarter. EPS of $0.80 was forward of the market’s forecast of $0.78.

Earlier this 12 months, Oracle redefined its enterprise segments and now not reviews revenues it generates from its Cloud infrastructure and platform companies.

Total cloud companies and license assist revenues grew 3% over the 12 months to $6.64 billion, accounting for 69% of its quarterly revenues. Within the section, whole cloud license and on-premise license fell 9% over the 12 months to $1.22 billion. According to Oracle, the Fusion ERP and Fusion HCM now account for greater than $2.6 billion in annualized revenues for the corporate.

Total {hardware} revenues reported a decline of 5% over the 12 months to $891 million and Services revenues fell 5% to $817 million.

During the quarter, Oracle repurchased 203 million shares price $10 billion. It additionally declared a quarterly dividend of 19 cents per share.

For the present quarter, Oracle expects to ship $0.86-$0.88 in earnings per share, in contrast with the Street’s forecast of $0.85 per share. The continued development in cloud-based mostly revenues is anticipated to drive the rising margins. Oracle is concentrating on to finish the quarter with revenues rising between 2%-4% over the 12 months.

Oracle’s Focus Area

Oracle at present is concentrated on delivering on its Autonomous Database initiative. It not too long ago launched the subsequent-era autonomous database, which is supported by machine studying. It’s pairing its Autonomous Database with its new Generation 2 Cloud infrastructure that is anticipated to assist drive extra market share for the corporate.

Oracle launched its first autonomous database in March this 12 months, leveraging it for heavy analytics and reporting. Last quarter, it launched Autonomous Transaction Processing to handle transaction processing and question processing. Both companies use machine studying within the database and within the underlying cloud infrastructure to assist with patching and tuning the database with out human intervention. The final aim of the autonomous perform is to decrease working prices by decreasing tedious guide administration and to drive uptime enhancements.

Oracle is satisfied that the brand new database will enhance its competitive place within the cloud in opposition to Amazon Web Services (NASDAQ:AMZN). A couple of benchmark studies have revealed that the Autonomous Data Warehouse Cloud does have significant performance advantages over Amazon. For occasion, a benchmark revealed that the Oracle database ran a workload 11 instances sooner and eight instances cheaper than Amazon’s Aurora database.

It’s nonetheless early days to touch upon how effectively Oracle’s Autonomous engine would drive Oracle’s subsequent spherical of development. There’s no denying that firms that are dedicated to Oracle due to their legacy purposes should still wish to proceed to work with Oracle. But latest reviews recommend that these firms are shrinking, making it tough for Oracle. Oracle will certainly want a revised technique that may cater particularly to the extra agile IT organizations of at present. Do you assume the brand new merchandise – such because the Autonomous Database – are geared in the direction of these markets? Will Oracle really be capable to compete with Amazon on the cloud?

Also, do you assume Oracle would profit from acquisition of different gamers within the database house so as to add to its portfolio? How about MongoDB (MBD), whose addition might present NoSQL capabilities to Oracle? MongoDB at present is buying and selling at $85.55 with a market capitalization of $4.6 billion. It not too long ago reported quarterly revenues of $57.5 million with a web loss of $31.2 million and an adjusted web loss of $0.45 per share.

The stock market appears cautious and would like to see a few more quarters before passing a verdict on the company’s capability. To drive extra confidence in its cloud technique, Oracle may benefit from the acquisition of some huge gamers. Its rivals have made some huge cloud-based mostly acquisitions not too long ago. For occasion, Salesforce.com (NYSE:CRM) acquired MuleSoft for $6.5 billion, and Microsoft (NASDAQ:MSFT) acquired GitHub. I have mentioned this before, and I nonetheless consider, that Oracle ought to consider the acquisition of Workday (NYSE:WDAY) or ServiceNow (NYSE:NOW). Acquisitions of both of those firms would add robust cloud capabilities to Oracle’s portfolio. But these are each huge, daring strikes. Workday at present is buying and selling at $152.06 with a market capitalization of $33 billion. It final reported revenues of $743 million with a web loss of $153 million for the October ending quarter. ServiceNow is buying and selling at $169.92 with a market capitalization of $30.5 billion. It had ended its September quarter with $673 million in revenues and $8.4 million of web earnings.

Meanwhile, Oracle’s stock is at present buying and selling at $46.24 with a market capitalization of $175.16 billion. It touched a 52-week excessive of $53.48 in March this 12 months. It has recovered from the 52-week low of $42.57 that it had fallen to in June this 12 months.