With the last quarter's results out, we thought we would update this chart to see if Oracle's cloud services had slowed further, or made a turnaround.
The problem is, we can't.
Oracle has decided to fold its cloud services revenue in with its legacy license support figures into a new “cloud services and license support” line, which now accounts for 72 per cent of revenues. In the last quarter, this business segment grew 3 per cent, while the other three business lines shrank.
Perhaps more tellingly, “cloud services and licence support” recorded its first decline sequentially in two years.
However, there might be another way to see how Oracle's views its cloud prospects — by looking at its capital expenditures. This is because data centers, which host the digital bits floating in the ether, require a ton of upfront investment.
As you can see, 2015 marked an inflection point as Oracle ramped up its cloud business. The slightly lower spend in the 2018 financial year, $1.7bn versus $2bn in 2017, might give investors food for thought. If Oracle is so bullish on the cloud growth, why the drop off?
This capital expenditure slowdown is even more pronounced when Oracle's cash spend is stated as a per cent of revenues. Last year, as revenues grew 6 per cent, capital expenditures fell to only 4.4 per cent of revenues
Still, $1.7bn might seem like a chunk of money to throw at a product line. Well, that is until you consider what its big three cloud rivals — Google, Amazon and Microsoft — spent on capital expenditure as a per cent of revenues over the same period. Amazon and Google spent nearly 12 Billion Each, over 6 times the investment of Oracle.
So if not on capital expenditures, where is Oracle spending its cash? Readers might be shocked, shocked, to hear it loves a stock buyback. Last quarter, Oracle's buyback bill came to $10bn, 25 times its $383m capital expenditure line, and almost as much as the $11bn it spent last year. A further $12bn has been authorised by the board.
Catz believes its “stock is an unbelievable buy, so we are buying back”. Can't fault that logic. But with 1 per cent revenue growth, less visibility on the cloud business and a share price trading at 5 times revenues, investors may begin to agree to disagree.
https://ftalphaville.ft.com/2018/10/03/1538575273000/Oracle--cloud-quiet/
Great article! But here is the real rub. From the start LE was against cloud:
https://www.cbronline.com/cloud/he-said-what-5-things-larry-ellison-actually-said-about-cloud-4563323/
Direct quote from LE:
"We’ll make cloud computing announcements because, you know, if orange is the new pink, we’ll make orange blouses. I mean, I’m not gonna fight this thing … well, maybe we’ll do an ad. Uh, I don’t understand what we would do differently in the light of cloud computing, other than market … you know, change the wording on some of our ads."
And so that is what Oracle has done. Oracle rented some data centers, hired a few developers and changed the wording in its Marketing ads. As the rest of the competition sprints ahead, Oracle spends its cash on propping up its stock price.
To me its quite clear. LE and Oracle have thrown in the towel. Its done, it has outsourced talent for cheap labor and has no vision for any of its products. It tries to force customers into the Oracle cloud through software audits and refuses to make an even playing field for other cloud providers on its database technology.
It seems that Oracle is deliberately winding down operations. I am certain this will equate into more employee reductions in force in the very near future.