Oracle claims second-largest SaaS vendor title, while Q4 profits slip

Oracle's hardware business showed a slight gain in the quarter

Oracle is now the industry's second-largest SaaS vendor after Salesforce.com, but it made that announcement as fourth-quarter profits slipped slightly and on-premises software license sales ended its fiscal year flat.

Revenue for the fourth quarter, which ended May 31, rose 3 percent to US$11.3 billion, while net income fell 4 percent to $3.65 billion.

New software license sales in the quarter were $3.77 billion, the same as in the prior fourth quarter. Software license updates and product support was $4.7 billion, a 7 percent rise.

But SaaS (software-as-a-service) and PaaS (platform-as-a-service) revenue rose 25 percent to $322 million and IaaS (infrastructure-as-a-service) sales jumped 13 percent to $128 million.

"Oracle is now the second largest SaaS company in the world," CEO Larry Ellison said in a statement. "In SaaS, we're in front of everybody but Salesforce.com. In IaaS we're larger and more profitable than Rackspace. We plan to increase our focus on the cloud and become number one in both the SaaS and the PaaS businesses."

The quarter showed signs of life for Oracle's hardware business, which had seen revenue drop steadily since the company got into hardware with the acquisition of Sun Microsystems.

Hardware systems product sales grew 2 percent to $870 million, as did hardware systems support, to $596 million.

Oracle has focused on selling "engineered systems" like Exadata rather than commodity hardware.

"We have transformed Sun's commodity hardware business into a profitable and growing Engineered Systems business," Oracle co-President Mark Hurd said in a statement. "We saw record levels of Engineered Systems shipments and expect to deliver our 10,000th unit in Q1."

For the full year, revenue was up 3 percent to $38.3 billion, while net income was flat at $11 billion.

"Oracle is focused like a laser on one goal over the next five years," namely becoming the number-one player in SaaS and PaaS, Ellison said during a conference call Thursday. There are a number of reasons this will happen, he added.

For one thing, Oracle has the most sophisticated and comprehensive set of cloud applications, Ellison claimed. Second, Oracle has lined up armies of sales people to sell cloud services, and "it's working," he added.

Oracle is performing well against rival cloud vendors such as Workday, according to Ellison. "We are dominating Workday in Europe," he claimed.

Oracle is also seeing traction increase for its cloud ERP (enterprise-resource-planning) software, adding 120 new customers in the fourth quarter alone, he said. "ERP is in early days, but Q4 was great."

In addition, sales people are also paid the same whether they sell an on-premises license or a cloud subscription, Ellison said.

During Oracle's next fiscal year, the company plans to grow SaaS subscription bookings by more than 50 percent, he said.

As Oracle's cloud business grows and matures, it will become more lucrative than selling on-premises licenses. Cloud subscription fees don't bring in as much money up front as an on-premise license sale, but over time they end up being more lucrative, Ellison said. "In the long term, we make much, much more money."

As Oracle completes the rollout of its IaaS and PaaS services later this year, another "gigantic opportunity" lies in attracting software vendors to the platforms. Many cloud vendors, including Salesforce.com, already use Oracle technology under the hood of their applications.

Oracle's products present a "fast track" to the cloud for vendors that have lagged the pack, Ellison said. New elements of Oracle's technology stack, such as a recently launched in-memory option for its database, may help lure companies into the fold.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

This story, "Oracle claims second-largest SaaS vendor title, while Q4 profits slip" was originally published by IDG News Service .

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