Oracle's Mark Hurd - "Do we get calls from customers that we haven't been called or talked to in 20 years? The answer is yes"

That’s more like it! Oracle cheered up Wall Street yesterday with a return to sales growth for Q4, even if earlier quarters meant the full year was essentially flat.

For Q419, revenue rose 1% to $11.1 billion with net income  up 14% on $3.7 billion. Full year revenue was $39.5 billion with net income of $11.1 billion.

Cloud licences and on-premise licences grew 12% in Q4 to $2.5 billon, while Cloud Services and Licence Support turned in $6.8 billion, flat year-on-year. Fusion HCM grew 25% in Q4, while Fusion ERP revenue was up 44% and NetSuite ERP was up 28% during the quarter.

It’s a story of “strong momentum”, according to Co-CEO Mark Hurd, citing wins including Diebold Nixdorf, which had personal resonance:

I used to compete with them when I was in NCR. Diebold bought Nixdorf and Diebold was a DBS customer, Nixdorf was an SAP customer. They combined the two and they will be going to Oracle Cloud ERP. So the whole  of Diebold Nixdorf will run on our Oracle Cloud ERP.

Another win close to home for the former Hewlett-Packard CEO was oil and gas drilling firm Helmerich & Payne:

The reason I've heard them is their stock symbol on the New York Stock Exchange was HP. And for years, I wanted their stock symbol and they're about a $1.6 billion company. And while I never got the stock symbol from them, we have replaced Epicor with Oracle Cloud ERP at Helmerich & Payne.

Other new logos include Tiffany and Experian:

Experian, which is a $1 billion company, bought really our whole ERP suite, ERP planning, supply chain, procurement. They did it against a background of basically having a little bit of everything, they had a little bit of DBS, a little bit of SAP and a little bit of Microsoft and replaced it all with the Oracle Cloud.

Knockouts

A point Hurd wanted to emphasise was the range of competitive knock-outs that he’s seeing:

I didn't do this accounting exactly, but as many of our logos are from outside of the traditional Oracle user base, as are from the Oracle user base.

He argued that this ‘outside’ interest is in part being helped by SAP’s own product strategy:

SAP is forcing older customers to a new platform by the beginning of 2025. That forces all their customers to move and all the changes, not just the changes they've just made, but all the changes they made to the code, has to be remade to the code. And what that means is, they have to roll up a big new bill to move to HANA…I think it's an incredibly interesting strategy on their part, to put all their customers at play. Do we get calls from customers that we haven't been called or talked to in 20 years? The answer is yes…When we sold to customers 15 years ago, they never really talked to us after that and vice versa because you're expected to stay with these ERP systems forever. Some percent of their base will move as a result of just this, because it's a lot of money for not getting much, real simple.

Hurd also touched on the recently announced alliance between Oracle and Microsoft, arguing that it provides a valuable unifying option for customers of both firms:

Most customers have Microsoft technology and Oracle technology. So, they might have a Microsoft analytics suite and their data in an Oracle database. We want to make it as easy as possible for you to run those Microsoft analytics in Azure, accessing the Oracle database and the Oracle Public Cloud. We built these high speed interfaces and…we glued the technologies together. But we also have unified the customer experience. So it feels to the customer like they're working in one cloud, but they have two suites of products and technologies they have access to, and they can inter-connect those things. The Oracle database is still running in the Oracle Cloud and the Microsoft analytic technology is running in the Microsoft Cloud. They're just talking to each other at high speed and highly reliable.

Database trials 

CTO Larry Ellison picked up on another theme - take-up of the Oracle Autonomous Database, which he said added 5000 new trials during Q4. These aren’t contributing to the bottom line yet but Ellison has a plan:

We're seeing very, very rapid adoption…a lot of our existing customers might come in with a very small project, let's say, a $30,000 ARR project, and within 60, 90 and 120 days, that becomes $120,000 project. And after another few months, it becomes $0.5 million project. So, we're really optimistic about this business….The thing that I find fascinating is the consumption data curves, which shows our consumption rate growing much faster than the fields currently anticipating. To me, that’s just wonderfully encouraging. And hopefully this is the beginning of the trend. We'll find out soon.

The Oracle founder also touched on the product transitions going on across the company’s product portfolio which is resulting in inevitable declines in some areas:

Really great, hot new products, like Autonomous Database, Fusion cloud application suite, NetSuite are selling really well and accelerating. They're doing extremely well. Quite frankly, we have some other product lines that we’re quite naturally downsizing, like some of the acquired kind of hardware. There are some oldest on-premise, software products that aren't really doing well…So yeah, there are some of our businesses that are not, if you will, hot. But the good news is, the hot businesses are now bigger than the not so hot businesses, and that's determining our future.

My take

The uptick in the Oracle share price was indicative of Wall Street’s collective relief at the better than expected numbers. It’s not been an easy fiscal year for the firm as the cloud transition continued to take its own sweet time to deliver. And even if Q4 saw an improvement, it was still marked by job losses due to restructuring. Entering fiscal 2020 on more upbeat news is clearly going to be welcome.