Will Oracle Surpass Salesforce by the End of 2015?
Oracle Continues Strategies to Conquer the Cloud Space in 1H15 (Part 10 of 17)
Oracle claims it will surpass Salesforce by the end of 2015
In its 3Q15 earnings release, Oracle (ORCL) continued to state its focus on the cloud. Amazon (AMZN) and Salesforce (CRM) are leading players in the cloud and SaaS space. At Oracle, the overall contribution to top-line revenue from software and cloud licenses has been consistently increasing from 72% in 2012 to 76.6% in the nine months ended February 28, 2015.
As we have seen in its 3Q14 earnings, Oracle’s cloud has diversified offerings under its cloud umbrella. In its earnings release, Oracle’s chief technology officer (or CTO), Larry Ellison, claimed that his company intends to surpass its peer Salesforce by the end of 2015.
According to Ellison, “Oracle now has a cloud revenue run rate of well over $2 billion a year. We’re already the world’s second-largest SaaS and PaaS company. On our last quarterly conference call, I predicted that in our fiscal year 2016 Oracle would likely sell more SaaS and PaaS new business than Salesforce.com.” He further stated, “Salesforce.com has announced that it also expects to add about $1 billion of new SaaS and PaaS business this year. So it’s going to be a close race who sells more in the cloud this year, us or them.”
The above presentation shows the plan devised by Larry Ellison and Oracle’s co-CEO, Mark Hurd, on how the company intends to become the leading vendor in the cloud computing space. To gain diversified exposure to Oracle, you can invest in the iShares US Technology ETF (IYW). IYW invests about 3.92% of its holdings in Oracle.
Increased customer acquisition in various Oracle suite offerings supports cloud growth
In 3Q15, Oracle’s software and cloud revenue rose by 7%, meeting the company’s 5% to 8% growth in constant currency terms. Software as a service (or SaaS) revenue grew by 30% to $372 million. However, a mere total cloud business of $527 million still has a long way to go if Oracle intends to dominate the cloud space. During the earnings call, Oracle’s co-CEO stated the following numbers to support the company’s cloud growth argument:
800 new SaaS customers
220 new customers in HCM cloud
407 new customers in customer experience
160 new customers in enterprise resource planning (or ERP)
less than 25% of ERP SaaS wins involve any on-premise Oracle ERP
30 existing customers expanded their cloud services in 3Q15
Lawrence Allison also stated, “We’re adding customers at more than 10x the rate of Workday (WDAY).”
As we have seen in the earlier part of the series, Oracle launched new features to its Marketing Cloud within one month of Salesforce adding analytics and data science features to its existing offering of Service Cloud and Marketing Cloud, which clearly indicates that Oracle is very closely following Salesforce’s development in the cloud space. It remains to be seen who will come out ahead in this competition.
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