Cloud will be key to further Oracle growth: Ovum

Tim Jennings/Ovum
10 Oct 2012
00:00

Oracle announced its first-quarter financial year 2013 results on September 20, and while earnings per share were strong and on target, revenues were a little behind financial analysts’ estimates.

Research firm Ovum also said there was continued good growth in new software license revenues, and Oracle stated that from this quarter onwards it will report a combined figure for new software license and cloud software subscription revenue, rather than breaking out application and technology revenues as it has done in the past.

Human capital management (HCM) was the quarter’s standout performer in Oracle’s software-as-a-service (SaaS) portfolio, and it also announced the addition of new common infrastructure services for the Oracle Cloud, Ovum said.

While engineered systems momentum continues, overall hardware revenues fell further. Oracle was subject to adverse currency effects of 5% on average across its business over the quarter. Ovum’s analysis below uses the “as announced” figures rather than a constant-currency comparison, unless specifically noted.

Oracle’s first quarter earnings announcement (all figures on a GAAP basis) showed total revenues down 2% at $8.2 billion. Within that total, the new benchmark figure of new software license and cloud software subscription revenues was up 5% at $1.6 billion, while software license updates and product support revenues were up 3% at $4.1 billion, and hardware systems product revenues were down 24% at $779 million. Operating margin stood at 35%, while net income was up 11% at $2 billion. GAAP earnings per share were $0.41, up 15% compared to the previous year.

Ovum believes that while overall revenues were slightly down due to currency considerations, the continued growth in Oracle’s core software business is encouraging for the company. The reporting change to combine software, middleware, and database revenues into a single license and cloud subscription figure is indicative of the evolving software market, and also shows the key opportunities for Oracle’s future growth.

Tim Jennings is Ovum’s chief analyst for enterprise IT and an Ovum Research Fellow

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