Despite Lackluster Q3, Oracle Execs Tout Gains Against IBM, Workday And Salesforce.com


Oracle, despite missing Wall Street's expectations for its fiscal third-quarter earnings on Tuesday, said its cloud computing and engineered systems businesses are well-positioned to take on rivals like IBM, Salesforce.com and Workday.

For the quarter ended Feb. 28, Oracle reported a profit of $2.57 billion, or 56 cents per share, up from the 52 cents per share it reported in last year's third quarter. Excluding items, Oracle earned 68 cents per share, but Wall Street analysts were expecting 70 cents per share.

Oracle's revenue during the quarter jumped 4 percent to $9.31 billion, up 6 percent year-over-year but just short of the $9.36 billion Wall Street analysts were expecting.

[Related: HP Aims To Tear Into IBM With New SAP HANA Shark]

Despite the lackluster quarter, there were a couple of bright spots for Oracle. Hardware revenue grew 10 percent to $725 million during the quarter, and sales of engineered systems such as Exadata and SPARC SuperCluster jumped 30 percent.

This growth was fueled by "a very long list of customer wins" against IBM during the quarter, Oracle Co-President and CFO Safra Catz said on the call.

Oracle, which sold its first Exadata Machine five years ago, is on track to deliver its 10,000th engineered system in the next few months, CEO Larry Ellison said on the call. "We believe Oracle’s engineered systems are well on their way to replacing IBM P Series as the leader in high-end computing," he said on the call.

In an apparent reference to Amazon Web Services, Ellison talked about an unnamed firm -- which is both a customer and competitor of Oracle -- that installed an Exadata system and is seeing 10 times better application performance at "a fraction of the cost."

Such scenarios are not uncommon, Ellison said, because Oracle handles all of the heavy lifting involved with integrating the various parts of these systems instead of making customers do it.  

On the software side, Oracle's revenue during the quarter was $7 billion, up 6 percent from last year, while cloud subscription revenue was $292 million, up 24 percent year-over-year. Oracle Co-President Mark Hurd called it the vendor's "best quarter ever" in cloud, with bookings growth of 60 percent.

Oracle and Salesforce.com inked a nine-year agreement last June that calls for integration of Salesforce.com's CRM and other cloud applications with Oracle's Fusion HCM and Financial Cloud Software-as-a-Service apps. Salesforce.com is adopting those Oracle applications to run its own business.

But Oracle also is competing with Salesforce.com in sales automation software, and Oracle's third-quarter bookings growth, Hurd said, was "considerably higher" than Salesforce.com.

Oracle added 250 customers for its human resources management software during the quarter, which Hurd said was around four to five times as many as rival Workday reported adding during that time. Oracle also has more ERP customers and is growing that business faster than Workday, he said.

PUBLISHED MARCH 19, 2014