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Larry Ellison: Oracle Is Finally Seeing Positive ‘Signals’ Around Its Autonomous Database Service

Q4 earnings delivered cloud software sales exceeding guidance and Wall Street predictions, more than making up for the decline in Oracle's legacy product lines. ‘We have these other businesses that are just melting away and we don’t care,’ Ellison says.

Oracle ended its fiscal year 2019 in a strong quarter powered by gains in its core database portfolio, with encouraging signs of adoption of the company's autonomous database technology, Oracle's top executives told investors Wednesday in an earnings call.

In the fourth quarter, ended May 31, the Redwood Shores, Calif.-based technology giant gained overall database market share thanks to a surge in database license deals that encompassed rapid sales growth of the options required to run the "self-driving database" that automatically patches, encrypts, backs up and tunes, Chairman and CTO Larry Ellison said.

"It's great to see it just beginning to show up in the numbers," Ellison said of the autonomous database service that's been a central focus of the company for more than a year.

[Related: Oracle Sales Stagnant In Q3, But Fusion And NetSuite Business Application Suites Booming]  

Consumption metrics for autonomous database running on its second-generation Oracle Cloud Infrastructure, OCI, tell an even rosier picture than bookings, Ellison said.

Oracle is "getting signals" that show "much faster usage of autonomous database than sales forecasts," he told investors.

The autonomous database is one example of Oracle transitioning its business as some legacy products inevitably fall off.

"Our hot, rapidly growing products are now bigger, as opposed to some of those products, like Sun SPARC, that are now in decline," Ellison said. "Those curves have crossed each other."

Oracle CEO Mark Hurd described the aggregate growth rate of the company as "made up of negative 25s and plus 27s."

Businesses like SPARC servers declined by 25 percent, but those losses are more than made up in growth of divisions like NetSuite, and ERP and HCM Software-as-a-Service solutions, Hurd said.

"We have these other businesses that are just melting away and we don’t care," Ellison said.

Oracle stock surged on both revenue and earnings beats.

Quarterly revenue of $11.1 billion marked 1 percent year-over-year growth, according to CEO Safra Catz.

That figure beat Wall Street expectations by $210 million. Earnings-per-share of $1.16 also beat expectations by 8 cents.

The better-than-expected financials drove Oracle stock up to $55.30 in after-hours trading, after a market close Wednesday of $52.68.

Oracle's Cloud Services and License Support category saw revenue of $6.8 billion, topping analyst predictions of $6.76 billion. License revenues, both from cloud and on-prem deals, came in at $2.5 billion—more than $180 million more than predicted by analysts.

In the earnings call, Ellison addressed a recent interconnect partnership with Microsoft that links cloud datacenters to better enable workload portability.

"We glued the technologies together, but we also have unified the customer experience," Ellison said. For that reason, working across Oracle and Azure feels like a single cloud that's encompassing the two technology suites, he said.

Catz said the deal with Microsoft "will only help accelerate the transition to autonomous database."

Oracle has moved almost all customers now from its "classic" Infrastructure-as-a-Service cloud to OCI Gen 2, Ellison told investors.

That second-generation OCI infrastructure differentiates itself from all competitors with an architecture that separates cloud control code from customer workloads.

"It's impossible for a cloud customer to get at our code and hack it. Also impossible for our programmers to look at our customers data," Ellison said. "This is a huge differentiator between us and everyone else."

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