Oracle's new software license and cloud software subscription revenues for the quarter ended May 31 were up just 1% from the year-earlier period to $4.0 billion. Total revenues were unchanged from the same quarter last year at $10.9 billion. That performance fell short of the $11.1 billion analysts had expected on average, according to Thomson Reuters. It also marked the second quarter in a row in which Oracle reported no revenue growth and fell short of expectations.
During a conference call with financial analysts, Oracle president Safra Catz blamed the marginal results on lagging sales in the Asia Pacific and Latin American regions, with sales in China, Brazil and Australia being particularly disappointing. She also issued cautious guidance for the current quarter, calling for 0% to 8% growth in new software license and subscription revenue.
Ellison and Oracle president Mark Hurd focused on the bright spots in Oracle's performance, highlighting a 45% gain in engineered systems revenues and a 50% gain in cloud subscription revenues, respectively. They also lashed out at competitors, with Ellison promising database advances that will challenge SAP's Hana database and Hurd asserting that Oracle has exceeded a $1 billion annual-revenue run rate in the cloud, "larger than SAP and Workday combined."
[ Want more on Oracle's hardware options? Read Oracle Sparc T5 Can't Make Sun Rise. ]
Ellison revealed that the long-anticipated Oracle Database 12c will be released next week. The key new feature of the product is support for multi-tenancy for cloud deployments, and Ellison promised "a startling series of announcements" would accompany the launch.
"Next week we will be announcing technology partnerships with the largest and most important SaaS companies and infrastructure companies in the cloud, and they will be committing to using our technology for years to come," he said, ticking off partners including Salesforce.com, NetSuite and, mysteriously, Microsoft. The last company on that list is a surprise given that Microsoft SQL Server competes directly with Oracle Database.
Ellison also revealed that Oracle will announce a 12c upgrade by year end that will delivery in-memory capabilities, a clear response to SAP Hana as well as in-memory database enhancements promised by IBM and Microsoft.
"Oracle 12.1c will be an in-memory database designed to work exceedingly well with our M-Series [Sparc] machines, which have more memory than any other computer on the planet," said Ellison, noting that the M-Series offers 32 terabytes of RAM. "One of the reasons I was very confident that SAP Hana could never compete with Oracle over the long term is because of 12.1c."
On the hardware front, Ellison said that Oracle's Exa-series engineered systems racked up a record quarter with more than 1,200 units sold. But that performance failed to stop the continuing slide of Oracle's overall hardware business. Hardware revenues totaled $849 million in the fourth quarter, down 12% from the $977 million reported in the same quarter last year. Ellison repeated the explanation that hardware sales are declining because the company is moving out of low-margin x86 server and OEM storage sales in order to concentrate on high-end systems.
Earlier this year Ellison vowed that the hardware business would stabilize and return to growth in the second half, a prediction he was forced to revise.
"The declining businesses have finished declining," said Ellison, pointing to engineered systems and the recently refreshed Sparc server business as Oracle's two remaining hardware businesses. "Our only assumption for growth is that our engineered systems will continue to grow. That alone will drive our hardware business into growth."
Hurd outlined a series of Oracle gains in the cloud computing market, including adding 500 new cloud applications customers in the fourth quarter with 300 in the human capital management (HCM) category alone.
"Not only are we bigger than Workday in HCM, we are growing faster than that company," Hurd said.
Oracle Fusion HCM is leading Oracle's cloud application gains, with 80 new customers including British Telecom, Siemens, Yahoo and Intuit. In the customer experience category, which includes the recently acquired Eloqua cloud-based marketing application, Oracle added more than 200 customers, according to Hurd. Customer wins in that category included eBay, KLM, Dow Corning, Sprint Nextel and Capital One.
Looking beyond applications, Ellison highlighted Oracle Database and Java (the open source support business acquired with Sun Microsystems) as the foundation of Oracle's cloud platform services. These stack up against Salesforce.com's Force.com platform, which Ellison labeled as proprietary.
"When you make additions to our SaaS applications, you use the Oracle Database and Java, which are industry standards," Ellison said. "We don't think any of the big cloud players can compete with us at the platform layer."
Oracle's full fiscal-year performance included a 6% constant-currency increase in new software licenses and cloud software subscriptions over the prior year to $10.3 billion. Total revenues reached $37.1 billion, up 2% from the prior year in constant currencies. Net income was $10.9 billion, up 13% from the prior year in constant currencies.
Catz announced that Oracle will double its quarterly dividend and buy back as much as $12 billion in future quarters. These nods at investors failed to ease disappointment with the latest results and did not stop a 9% skid in the company's stock price in after-hours trading.
Wall Street will be watching in fiscal 2014 to see if Oracle's new database, its new cloud platforms and applications, and its latest high-end hardware will spark strong demand.