Can Oracle still return to the peak?
Editor’s note: This article is from WeChat public account “American Stock Research Institute” (ID: meigushe), author: US stocks Research society. Original title: Net profit fell by 6% year-on-year. Will Oracle, which is welcoming the year of “Nothing”, fall?
On September 12, Oracle, the world’s leading commercial software vendor, announced its new quarterly earnings. According to the financial report, Oracle’s revenue in this quarter increased by 2% year-on-year, and net profit decreased by 6% year-on-year. The performance of the two core data is not very satisfactory. At the same time, Oracle CEO Mark Hurd will take a vacation due to health problems. After the two unfavorable news prompted Oracle’s earnings report, the stock price fell by nearly 5% in after-hours trading.
According to the financial report, Oracle’s current revenue business core is in cloud services and authorized support business, accounting for more than 73.8% of total revenue. Although the cloud service business continues to grow year-on-year, this growth rate is far behind other The technology giant, which also means that Oracle’s competitiveness in this main business is not enough.
In the PC era, Oracle started its database management and sold software software for enterprises to receive market dividends. Although Oracle has become a leader in this field, the development of the times is always very fast, and it may be missed if you don’t pay attention to the giants. Development Opportunities. Due to mistakes in decision-making, Oracle missed the opportunity of cloud computing development, and now it is far behind Amazon, Microsoft, Google and other technology giants. US Stock Exchange Research Institute analyzes its dilemma and opportunities from the perspective of business competitiveness by interpreting Oracle’s new financial report.
The year-on-year growth rate of revenue and net profit slowed down. Cloud service business accounted for 73% of total revenue
This time Oracle’s earnings report was originally released after the US stock market closed on Thursday (Beijing time Friday morning), but chose to release it one day in advance. On the day of the earnings announcement, the company’s co-CEO Mark Hurd will take time off for health reasons.
According to the financial report, Oracle’s total revenue for the first quarter was $9.218 billion, which was basically the same as the previous year’s $9.193 billion. The impact of exchange rate fluctuations was 2% year-on-year, which was less than Wall Street analysts’ expectations. . Net profit was 2.137 billionThe US dollar fell by 6% compared with US$ 2.265 billion in the same period of the previous year. The impact of exchange rate fluctuations was 3% year-on-year; diluted earnings per share was US$ 0.63, up from US$ 0.57 in the same period last year. After the release of the financial report, as of the end of the article, Oracle’s after-hours fell by 1.01%, after-hours share price of 55.72 US dollars, the market value of 187.773 billion US dollars.
According to business revenue, cloud services and authorized support business revenue is an important source of revenue for Oracle. In this quarter, cloud services and authorized support business revenues were $6.805 billion, compared with the same period last year. Compared with the increase of 3% of the US$6.609 billion, the impact of exchange rate fluctuations was 4% year-on-year, accounting for 73.8% of the total revenue.
Cloud licensing and on-site licensing business revenues were $812 million, down 6% from $867 million in the same period last year, excluding the impact of exchange rate changes, down 6% year-on-year; hardware business revenues were 815 million The US dollar fell 10% compared with US$904 million in the same period of the previous year. The impact of exchange rate fluctuations was 9% year-on-year; service business revenue was US$786 million, down 3 compared with US$813 million in the same period last year. %, excluding the impact of exchange rate changes, was down 2% year-on-year.
In terms of cost, Oracle’s total operating expenses for the quarter were $6.341 billion, down 1% from $6.415 billion in the same period last year, and the impact of exchange rate fluctuations was unchanged from the same period last year; The proportion was 69%, compared with 70% in the same period last year. Operating profit for the quarter was $2.877 billion, up 4% from $2.778 billion in the same period last year, excluding the impact of exchange rate changes, up 6% year-on-year; operating margin was 31%, compared to the previous year The same period was 30%.
From the perspective of Oracle’s financial report, the growth rate of core data is not very bright, and this is also the decline in Oracle’s growth rate for several consecutive quarters. This also shows that its major businesses are facing a small camp. Receive pressure. In the view of the US stock research institute, there are several reasons for the current downturn of the giants.
Tech giant Microsoft and Amazon become the strongest rivals Oracle cloud service business faces great resistance
This year, although Oracle’s share price has some gains, it is not very good based on the earnings reports of these quarters. Previously, Macquarie analyst Sarah Hindlian downgraded Oracle’s rating from “outperform” to “neutral” and lowered its target price from $56 to $55. Other Wall Street institutions are also taking a wait-and-see attitude. Investment banks, including JP Morgan Chase, UBS and Morgan Stanley, also reaffirmed their “neutral” rating on Oracle before the financial year, with target prices of $53, $54 and $59, respectively. . Credit Suisse is slightly optimistic, giving a “buy” rating and a target price of $60.
Many well-known investment institutions downgraded Oracle’s rating, which indicates that Oracle’s revenue prospects at this stage are not optimistic about investors, and it seems that the US stock research society is mainly affected by these reasons.
1, giant Amazon, Microsoft, Google partner to become competitors, Oracle cloud computing business lost to each other
According to Oracle’s latest earnings report, its cloud services and licensing support business revenue for the quarter was $6.805 billion, up 3% from $6.609 billion in the same period last year, excluding the impact of exchange rate changes. It increased by 4% year-on-year. From this year-on-year growth rate, it is really not fast, but the revenue of the business accounted for 73.8% of the total revenue.
On July 10, the authoritative research organization Gartner released global cloud computing market data. Amazon, Microsoft, and Alibaba Cloud accounted for 70% of the global market share and further squeezed the market share of “other” vendors. These giants not only have a high market share in the cloud computing market, but their cloud computing business is still growing rapidly, as can be seen from their latest quarterly earnings data.
The Amazon cloud computing business recorded revenue of $8.381 billion in the second quarter of this year, up 37% from $6.105 billion in the same period last year; and $685 million from the $7.696 billion in the first quarter of this year, an increase of 8.9 percent from the previous quarter. %. Microsoft’s smart cloud revenue in the second quarter was $11.391 billion, up 19% year-on-year, and operating profit was 9.668 billion, both higher than the same period last year. Alibaba’s cloud computing business revenue for the quarter was 7.787 billion yuan, a year-on-year increase of 66%.
From the growth rate of the cloud computing business revenue of these giants, they far exceed Oracle. At the same time, like Microsoft, Amazon, Google, etc., Oracle’s important customers need to use its software, but in the cloud era these giants have become Oracle’s competitors. For example, Amazon launched Redshift and Aurora, Alibaba Cloud launched POLARDB and other databases built entirely on the cloud. For Oracle, it is not easy to grab users from these giants.
2, Oracle’s decision-making mistakes in strategic transformation, excessive bet on SaaS led to the wrong track
The current trend of global technology giants capturing cloud computing is that they are empowering SaaS ecosystems, and PaaS+IaaS platforming is “integrated”. These giants do not produce SaaS themselves, but only provide services and empowerment. Expand their ecology in the SaaS space. On the one hand, for the giants, they only need to put the cost on the development of cloud computing technology, on the other hand, they can get more cooperation from SaaS companies.
In the cloud computing business, Oracle’s shortcomings to make up for itself are through the acquisition, directly complementing the shortcomings, and second, focusing on SaaS. For example, Peoplesoft, which was previously spent heavily on purchases, is HR SaaS, and the acquired Siebel is CRM. SaaS, the acquired Hyperion is Enterprise Performance Management SaaS. From this strategy point of view, Oracle’s cloud computing business is mainly concentrated on SaaS products and other giants’ ambitions are placed on the operating system, so that a comparison can see the difference in business layout.
Amazon like Amazon announced a major investment in its AWS Partner Network (APN), including the launch of the new AWS SaaS Factory. Microsoft also launched the “Microsoft Startup Enterprise Bizspark” and “Microsoft Venture Capital Accelerator” to support the winning SaaS developers. In the March 20th “Alibaba Cloud Summit”, Alibaba Cloud proposed “to practice internal strength, be integrated”, “do not do SaaS yourself, let everyone do better SaaS”.
Although Oracle is trying to find its development opportunities in the mobile field through transformation, but because of the “mistakes” in decision-making and the missed opportunities in the cloud computing field, it also makes it more gaps with other giants on the track. The bigger the situation, the more difficult it is to maintain the high-speed growth of the business.
3, Oracle has layoffs in many parts of the world, this action also exposed its problems
This year’s biggest “negative news” for Oracle should be considered as its layoffs. The layoff plan has been implemented globally, with layoffs in China, Mexico, India and Oracle headquarters. Among them, the scale of layoffs in the Chinese market should be regarded as the largest. According to domestic media reports, the US Oracle headquarters decided to close the entire research and development center in China, which means that it is distributed in Beijing and Shanghai.More than 1,600 employees in Shenzhen and other places will lose their jobs. The first batch of laid-off workers will reach more than 900 people. The second batch of layoffs will be held in July.
For the giants, the general layoffs are either financial problems or open source, or the current business development encounters resistance, in order to reduce losses and disrupt business. At present, Oracle’s layoffs in the Chinese market are the largest, and of course this is closely related to its unsatisfactory business development in China. In terms of office software, Oracle faces competition from local companies such as Kingdee and UF. In the cloud computing business, Internet giants Ali, Tencent, and Baidu have the majority of domestic market share, and Oracle’s business is difficult to compete with them.
The impact of layoffs on Oracle is still not small, in fact, it will affect investors’ trust in it to a certain extent. For Oracle, although the core business is concentrated in the cloud service field, the competitors of this track are too strong, and it is not easy for Oracle to overtake the curve.
The road to Oracle’s cloud computing transformation is a long way to go. Betting cloud computing tests the future comprehensive competitiveness
According to Oracle’s earnings report for these quarters, the slowdown in revenue growth has also raised concerns about the future development of the software giant. At present, Oracle’s business development focuses on the cloud service business, which also shows that the giant betting cloud computing track is trying to speed up the gap between the speed and the giant. In the view of the US stock research society, Oracle’s transformation path has a long way to go, and it is necessary to focus on the development of core business.
In order to better achieve the transformation, Oracle has drastically implemented the reduction action. Although it has some negative impact on it in the short term, it will be beneficial to its transformation in the long run. After all, after entering the cloud era, the requirements for talents and business have changed a lot with the past few decades. Oracle’s absorption of fresh blood is conducive to bringing new ideas to it. According to the financial report, Oracle’s technical investment is still improving, which will help improve its technical competitiveness in the field of cloud computing.
In order to gain more technical support in the cloud computing business, in addition to its own technology development, Oracle last year, Oracle acquired nine different companies to expand its cloud product portfolio. After the acquisition of Talari, Oracle became the first SD-WAN public cloud provider. According to foreign media reports, Oracle announced in November this year the acquisition of SD-WAN vendor Talari Networks. Currently, oracle boneThe text is still relatively adequate in terms of cash flow, which is still able to guarantee that it has enough money to acquire some start-ups with development potential to further improve its ecological layout in the field of cloud computing.
For Oracle, the lack of attention paid by executives to cloud computing made it miss the huge dividends and opportunities in this market. This also allowed other tech giants to seize the opportunity. In this regard, Oracle is miscalculated. At present, Oracle’s focus is on the cloud computing field. This also shows that its emphasis on this business is only a new breakthrough in the follow-up, perhaps an important factor to boost its share price.