Oracle's growth is not organic

There were bizarre statements in the earnings call and major red flags in the financial statements. Their announcement that executives were now going to be compensated primarily on cloud revenue is very strange, considering that SC and MH already cashed out their stock options this year to the tune of over $100,000,000. The earnings growth again was primarily due to a tax break as it was in Q4. New on-prem licenses shrank by 6%, and that was compared to a weak Q1 last year. This guarantees that Oracle's big profit engine - license renewals and maintenance (54% of revenue) - will start showing year-to-year revenue declines too. If you are not getting new customers, you are not getting customers who will renew in the coming years. The main area of growth was SaaS ... in other words, the Netsuite acquisition. Then LE said that Oracle wouldn't make any more cloud acquisitions and would concentrate on organic growth! Clearly, Oracle isn't growing organically. IaaS / PaaS showed growth on the income statement, but everybody knows that number cannot be trusted as customers are being forced to buy cloud when they renew on-prem licenses. (Microsoft has been doing the same thing for years.) Then came the weak guidance. Then add the rumors of turmoil, attrition, and layoffs on this board, almost all of which turned out to be true. Yes, I'll give Oracle this - they did show revenue growth, unlike IBM - but this growth is clearly not sustainable.

This was posted by @Phgwn0E-2ija in another thread, thought it was an excellent comment on how things are playing out at Oracle, and 100% on point.

Comment! It's anonymous!

8 replies (most recent on top)

And less than two weeks after the announcement that the executives would be compensated purely on cloud revenue came LE's announcement that all on-premises licenses are now good in the cloud too, so all that revenue can be counted as potential cloud revenue.

Organic growth comes down to performing more audits and migrating more support dollars to cloud revs.

There is no organic growth. How many new or growing customers do you know of?

If there was organic growth the cloud sales reps would be making their numbers, but they get nowhere near target.

The stuff the 3 Stooges say on the earnings call has no relationship to reality, they just come up with some sh:t to feed the inept analysts. Should be clear to anybody with half a brain that there is no strategy here other than to shrink the company by default simply because they have neglected everything too much to do anything else. Oracle is a dying company and all they are doing is trying to put some lipstick on this pig to prop up the stock a little longer.

Look at the income statement under "Provision for Income Taxes". Oracle paid $166 million less in taxes this year from Q1 of last year, which is 43% of the earnings growth for Q1FY2018. At the 65% margin for SaaS that SC claims, $266 million of the income was from SaaS, and it's pretty clear that Netsuite is the bulk of that. $266 + $166 = $432. Given a 3 percent increase in revenue from on-prem maintenance and renewals, Oracle's high margin cash cow, there should be another $100 million in profit, bringing the total to $532 million. However, income growth from last year was only $378 million. The other parts of the business that are not SaaS and not on-prem renewals actually lost $154 million. I readily admit that this is an overly simplistic analysis, but my point is that clearly there is no organic growth. As the above analysis indicates, the profits from on renewals are going to go down in the coming quarters as Oracle is shrinking in new on-prem licenses.

Here's another interesting thing from the income statement: Sales/Marketing and R&D costs remained the same over last year. Wait a minute, didn't Oracle say that they hired thousands of new cloud salespeople? The cost of layoffs is included in the "restructuring" item, so why didn't Sales/Marketing costs increase? No other explanation - there must have been very significant attrition from last year. If everything is so great, why are so many people leaving? Also, if LE says the company must now grow organically without acquisitions, how is this going to happen without increasing R&D?

Go Amazon(wholefoods).

Anyone know what tax break the original poster is talking about?

Oracle is being slowly liquidated - no meaningful investment in new products, people laid off all over the place, declining revenues, and now a declining share price to reflect this basic fact. Just call them IBM 2

Thread regarding Oracle Corp. layoffs

Oracle's growth is not organic

8 replies (most recent on top)

Post a reply