Oracle executives dodged rumours around new business with China-based social media application TikTok while co-founder and Chief Technology Officer Larry Ellison laid out the company’s plans for beating rival database products by Amazon Web Services during the company’s quarterly earnings call on Thursday in the US.
The third-quarter financial results, covering the three months that ended 28 February, marked the strongest organic revenue growth in 10 years, CEO Safra Catz said.
An analyst asked Ellison and Catz about a Reuters article that reported Oracle is near a deal to store the information of U.S. users of TikTok so that parent company ByteDance can’t access the information.
“The one thing I can tell you is we have an excellent relationship with the folks at TikTok,” Catz said on the call.
“I’ll second that,” Ellison said. “It’s excellent.”
The TikTok deal could address US regulatory concerns around data on the short-form video app, according to Reuters. In 2020, Oracle was competing to buy TikTok after former President Donald Trump threatened to ban the app over concerns data on the app was available to the Chinese government. Concerns over TikTok appear to have cooled under President Joe Biden.
When it comes to database products, Ellison said that the company’s MySQL HeatWave will be available for AWS and Microsoft Azure “in a few weeks.” His hope is that database users choose HeatWave as a single tool for both transaction processing and query processing in MySQL so that they don’t have to use MySQL with AWS’ Aurora relational database service and AWS’ Redshift cloud data warehousing product, or with another competing cloud database product such as Snowflake.
“We’re going after the Aurora user base and the Redshift and Snowflake user base,” Ellison said. “We want to make it really easy to convert from Aurora and Redshift, or Aurora and Snowflake, to Oracle HeatWave. And if we’re running on AWS, for example, you press a button – a couple of buttons – and your data is moved immediately to Oracle MySQL HeatWave. You do not – you do not – have to change your application at all. You press a couple of buttons and you move it. OK. Why would you do that? Well, because the cost performance benefits of moving to MySQL HeatWave are extraordinary.”
He continued: “MySQL HeatWave doesn‘t simply replace Aurora. It replaces both Aurora and Redshift. Or it replaces both Aurora and Snowflake because MySQL HeatWave does transaction processing very well – replacing Aurora – and it does query processing a lot better than Redshift or Snowflake.”
Ellison said that MySQL HeatWave outperforms about seven times faster than Redshift or Snowflake at two-to-five times lower cost.
“The bottom line is we believe the competition just got outplayed in every measurable metric imaginable,” Ellison said.
He continued: “You can spend US$80,000 on HeatWave, and that would cost you US$420,000 to run on Snowflake. It‘s a no brainer.”
CRN has reached out to AWS and Snowflake for comment.
‘Year 2000-like pandemic boom’?
When asked if he thinks the boom in digital transformation brought on by the pandemic forcing employers and organizations to adopt remote work, Ellison told an analyst that it’s still “early days.”
“Do I think this is a year 2000-like pandemic boom, people rushing to get to the cloud, and it‘s going to slow down now that the pandemic – thank God – is beginning to recede?” Ellison asked. “Just the opposite. We’re really still in the early days. We‘re in the early days of understanding how different cloud ERP is from on-premise ERP.”
Oracle has more than 10,000 customers in Oracle ERP Fusion and almost 30,000 customers including NetSuite, he said. Helping Oracle’s cloud business grow in use by independent software vendors (ISVs) is the use of Oracle’s cloud suite in business-to-business (B2B) purchasing systems, he said.
“It‘s this network of these ERP software systems talking to one another,” he said. “That’s a huge business revenue opportunity to turn on that B2B payment system.”
He continued: “Once the ERP customers started coming to Oracle, all of the adjacent applications and all of the ISVs with adjacent applications wanted to be in the same cloud as the ERP customers. The integrators had to become familiar with the cloud because that‘s where the customers are and that’s where new customers are going. The ISVs … giant banks, giant logistics companies putting up their logistics and payment systems in our cloud to facilitate B2B transactions between our ERP system is just a gigantic business opportunity that no one‘s really ever thought about before.”
Ellison used the call to name some wins over enterprise resource planning (ERP) rival SAP. He said that Oracle replaced SAP products at Italian telecommunications company Wind Tre, a division of Unilever and at the United Nations’ International Organization for Migration (IOM).
He said Oracle beat SAP on deals at TD Bank; Silicon Valley Bank; Johnson & Johnson; Boston-based medical device company Haemonetics; British aerospace company BAE Systems; India-based Tata Steel and Italian oil and gas company Eni.
CRN has reached out to SAP for comment.
Catz said on the call that the US$28.3 billion acquisition of health care technology company Cerner may close in the fourth fiscal quarter. The acquisition is Oracle’s largest in its history. The company recently extended its tender offer for the company to later this month.
With the upcoming acquisition of Cerner, Oracle will be positioned to dominate health care back-office technology, Ellison said. Oracle is adding industry-specific features to its products to improve nurse and doctor scheduling plus inventory management.
“That‘s why we think we’re in a good position to roll up health care, which is a gigantic industry,” Ellison said. “No one‘s ever really tried this before. But we have all the pieces. We have the payment pieces. We automate a lot of the insurers. We have HCM, which allows us to help them manage their workforce. We have ERP, which helps them keep track of inventory. And soon we will have Cerner, which will help them to deliver care to patients.”
He continued: “The benefits to every patient in the world are going to be enormous. We need to do this. The pandemic has shown a variety of weaknesses in our health care systems. We have the technology to address those weaknesses, and that‘s what we’re going to do.”
When asked about supply chain constraints for cloud products, Catz said the company is still overcoming “an extremely large backlog.” But the backlog gives Oracle “enormous visibility” on whether customers want cloud or hardware from the tech vendor. Catz is “extremely confident in the capabilities of my team to execute,” she said.
“I will admit that the past couple of years have been really challenging, and I‘m incredibly proud of our team,” she said. “I think our excellent relationships with our wonderful suppliers made it possible for us to build out our cloud as well as provide hardware to our customers. We couldn’t meet every need as quickly as we would have liked. And we have an extremely large backlog. That is absolutely true.”
She continued: “The reality is that we have so much, so much going on at the same time. We‘ve built out our cloud internationally. We’ve built a number of private clouds, where it is exactly the same capability as our public cloud for our customers who have regulatory requirements that require something special, whether it‘s data sovereignty or otherwise. And we are meeting everyone’s needs.”
For the three months ended 28 February, Oracle reported total revenue of US$10.5 billion, up 4 percent year over year. Total cloud revenue, including infrastructure- and software-as-a-service, reached US$2.8 billion, up 24 percent year over year.
Fusion ERP Cloud revenue was up 33 percent year over year, and NetSuite ERP Cloud revenue was up 27 percent year over year. Oracle did not break out the total revenue for each of those two products.
Cloud services and license support revenues reached US$7.6 billion, up 5 percent year over year. This segment represented 73 percent of Oracle’s revenue.
Cloud license and on-premises license revenues were US$1.3 billion, up 1 percent year over year. This segment represented 12 percent of Oracle’s revenue.
Oracle saw US$798 billion in revenue from hardware, representing 8 percent of the company’s revenue. That hardware revenue is a 3 percent decrease year over year.
Third-quarter earnings per share were lowered by 5 cents because of a decline in the share price of Oxford Nanopore and an operating loss at ARM server chip maker Ampere, according to the company.
“We remain confident that our investments in these two cutting-edge technology companies will deliver very strong returns for Oracle,” according to a company statement Thursday.
Catz said on the call Oracle's equity investments were “impacted by the widespread downturn in equity markets last quarter.”
Total Cloud@Customer revenue was up 43 percent, Catz said on the call. Backlog for Cloud@Customer machines grew to triple digits. Database subscription revenues were up 4 percent.
The company spent US$3.8 billion in capital expenditures for the last four quarters. Oracle is on track to invest US$4 billion in capital expenditures this year, Catz said.
Her guidance for the fourth fiscal quarter was total revenue growth of 3 to 5 percent in U.S. dollars. Cloud service and licensed support revenue is expected to grow between 4 and 6 percent.
Oracle traded at US$76.65 a share after hours, the same amount at market close.