However, this is not the topic of the day. The most important thing is quite simple: why Oracle is becoming an attractive company and why investors need to look into it.
Over the past year, I believe that Oracle has proven to the market and to itself that stable growth, stable recurring returns and additional innovation can match the return of investors.
So far so good
This year has been a good year for Oracle, as the company’s share rose 35%. However, the price-to-earnings ratio (P / E) for the last 12 months remains below 20, trading at about 50% of where Microsoft
is today and a fifth of Salesforce
– the company’s two main competitors. And while Oracle’s modest overall growth does not justify such times, these figures show that, despite a significant increase, it does not yet reflect its potential.
The cloud is the future
For Oracle and investors, the time on the company’s trajectory is cloud. In recent years, it has been at the heart of its products, services, acquisitions, innovation and investor interaction. Investor enthusiasm and skepticism should be closely tied to his success in cloud endeavors, namely IaaS (Oracle Cloud Infrastructure) and SaaS (cloud-based applications). Not that other parts of the company are not important, they rather reflect the past. For Oracle, the cloud is the future.
The challenge is to determine how strong and ready Oracle’s cloud business really is. Two years ago, I raised red flags for Oracle ‘s Gen 1 Cloud and I used the word “pretender” to describe the company’s entry into the cloud. I felt that there was a huge lack of revenue transparency and that Amazon’s offer was worse
AWS and Microsoft’s Azure didn’t give investors much excitement. Oracle accepted the challenge and made some firm offers.
A huge leap
For Oracle, two things have changed that made the company and its cloud business immediately more attractive. These are the launch of the 2nd generation cloud and the growing commitment to corporate revenue transparency.
After investors have been calling for greater revenue transparency for years, last quarter’s earnings finally took a look. The company said Oracle Cloud (SaaS and IaaS) now accounts for more than 25% of quarterly revenue, or $ 2.5 billion. While I would be even more encouraged if I could clearly separate the IaaS and SaaS business, the reality is no one, not AWS, Azure or IBM
or the alphabet
it does, why should Oracle then?
We now have a $ 10 billion launch rate for the cloud and a clear indication that Oracle is accelerating its cloud strategy by looking more closely at competitors.
In his earnings release, co-founder Larry Ellison referred to an upcoming Gartner report that should show that Oracle Cloud Infrastructure outperforms Google in third place in one of its top cloud rankings reports. At the very least, it shows how far Oracle has come, as Google Cloud has found itself almost indisputably the third cloud behind AWS and Azure.
Oracle’s SaaS business has also continued to show encouraging revenue growth equal to Salesforce’s NetSuite and Fusion for its CRM and ERP applications, with growth rates consistently 20% north over the past four quarters, quarterly results put Fusion’s ERP up 32% and NetSuite’s ERP up 28%.
Is Oracle back?
Over the past few years, Oracle and its management have shouted a lot about cloud skills, but the market obviously didn’t buy it.
However, Oracle, like Oracle, can make time, money, and unwavering commitment a tough turning point where hundreds of thousands of existing customers take their technology investments.
CEO Safra Catz, Ellison and the company’s management knew that the transition to the cloud was a priority, but the transition to a company like Oracle was not easy. This was reflected in his early efforts to create a successful cloud business.
Today, however, the outlook is different. The company’s ambition to create a vertically integrated cloud offering for its current and future customers offers a growing total addressable market and greater stickiness, which can only help strengthen the company’s long-term prospects. This is especially true for a company whose income is already recurring over 70%.
In some ways, there was never a question of whether Oracle’s cloud business could succeed; this was just when the solution reached the customer’s needs. It seems that now may be the moment.
In a market burdened with both uncertainty and the current one, there is perhaps a boring welcome addition to portfolios looking for stable growth, returns and a company positioned in the right marketplaces.
And despite the fact that the name Oracle is rarely exciting, the company seems to be returning at its best – it may be worth a second look at investors.
Daniel Newman is the company’s chief analystFuture research, which provides or has provided research, analysis, consulting and / or consulting to Microsoft, Zoom, Salesforce, AWS and dozens of other technology and digital companies. Neither he nor his company has any shareholding in that company. Follow him on Twitter@danielnewmanUV.