Weekly Software Notes: Oracle

by Trefis Team
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Global software giant Oracle Corp. (NASDAQ:ORCL) continued its aggressive expansion in the cloud computing market during the week ended June 28th. It announced a new data center in Brazil, which will become operational this August, thus strengthening Oracle’s presence in the Latin American cloud computing market. Meanwhile, the latest report on integrated platforms by IDC underscored Oracle’s dominant position in that market with over a 50% market share. It also indirectly highlighted the increasing importance of Oracle’s engineered systems product line in the company’s hardware products portfolio.

Oracle’s shares remained nearly stable during the week ended June 28th. In this report, we take a closer look at the above developments.

We have a price estimate of $42 for Oracle Corp., which is slightly higher than its current market price.

See our complete analysis for Oracle Corp. here

Oracle Set to Strengthen Presence in Latin America’s Cloud Computing Market

On June 24th, Oracle announced that it will open a new data center in Sao Paulo, Brazil in August this year. [1] The new state of the art facility will help Oracle strengthen its presence in the fast-growing Latin American cloud computing market. Oracle does not report revenues from Latin America separately in its SEC filings. However, the broader Americas region accounts for over half of the company’s total revenues.

Nevertheless, Oracle’s investment in the Brazil will put it at the forefront of the ongoing rapid growth of cloud computing in Latin America. According to IDC, cloud infrastructure spending is expected to grow by 22% in Latin America in 2015. This is second only to the 32% growth expected in Western Europe in 2015. [2]

The Latin American cloud computing market is expected to grow at a CAGR of 26% through 2018. [3] Currently, Oracle does not form part of the core group of the key cloud computing vendors in Latin America, which includes Amazon Web Services, Google and IBM, among others. With Oracle’s near-exclusive focus on cloud and willingness to expand its market share at the cost of margins (Read: Oracle Takes the Fight to Amazon With New Aggressively Priced Cloud Services), it is quite possible that it may break into the top-vendors category in the near future. This will further bolster Oracle’s market share in the global software-as-a-service (SaaS) and platform-as-a-service (PaaS) market over the medium term.

Oracle Retains Top Spot in Integrated Platforms Market

Oracle retained its dominant position in the global integrated platforms market in the first quarter of calendar 2015, as per the latest report by IDC. [4] With revenues of $392 million in the first quarter, Oracle commanded a 52% share of the global integrated platforms market. The overall market size stood at $755 million in the first quarter, putting it at a run rate of over $3 billion in calendar 2015.

A comparison of Oracle’s revenues from integrated platforms (as per the IDC report) against its reported revenues from the hardware division throws up a notable observation. Oracle’s revenue of $392 million from integrated platforms implies that this product category accounts for over half of its revenues from hardware product sales. It should be noted that this comparison is without adjusting for this dissimilar periods. IDC’s report is for the January – March quarter, which is being compared against Oracle’s December – February reporting quarter. (Oracle follows June – May fiscal year.)

This underscores the growing importance of Oracle’s engineered systems (Oracle’s term for integrated platform) product line in its hardware portfolio. Oracle is clearly willing to let engineered systems take center-stage in its hardware business, even if it comes at the cost of a decline in the standalone servers, storage, and networking hardware businesses.

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Notes:
  1. Oracle Press Release, June 24, 2015 []
  2. Cloud computing spending to hit $32bn in 2015, V3, April 22, 2015 []
  3. Cloud Computing Market in Latin America 2014-2018, PR Newswire, August 13, 2014 []
  4. IDC Press Release, June 25, 2015 []
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