It’s pretty easy to convince a crowd of the quality of a painting when you don’t allow onlookers to inspect its intricacies too closely. If they did, they might just notice all the little discrepancies that reduce its value.
Oracle does much the same when it comes to stating facts and figures. It’s well known that the mega-vendor doesn’t publicly share the exact number of customers using its Cloud product, although Oracle has previously suggested that over 750 customers currently use its Fusion Cloud ERP.
There is no description of the size of these organisations, where they’re based, or their industries, and there is no exact figure for how many Cloud customers Oracle has. The distinct lack of concrete figures provided has left us wondering just how accurate, or misleading, the growth statistics we are made privy to actually are.
Oracle has experienced a slump in sales numerous times over the past few years. However, for the recently ended fiscal year of 2021, the vendor had its second-best year since 2012. In fact, Oracle’s performance – based on sales growth and share earnings (though we know the vendor has had a massive repurchasing drive of its own stock over the past three fiscal years) – exceeded Wall Street predictions.
The vendor achieved sales growth of 3.6% in the 12 months that just ended, and in a recent publication, Oracle said its “quarterly sales of its Fusion application for managing corporate finances rose 46%.”
That’s a hefty increase in sales, right? But this statistic (which Oracle has not put a monetary value against) is reflective of only one application and one use case.
It’s pretty telling that Oracle has been selective about which statistics to share, preventing us from catching a glimpse of the full picture. Such an omission suggests that its Cloud-based applications did not experience the level of uptake that Oracle had hoped for.
Especially if we consider that, as standard, Oracle hikes up its prices by 4% every year. To indicate reasonable growth, the vendor’s sales should have equated to last year’s results, plus 4% (price increase), plus new sales. A sales increase of 3.6% suggests that the vendor is losing customers, not gaining them.
Not only this but with the vendor throwing everything into the proverbial Cloud pot, it is harder to gauge just how quickly Oracle’s Cloud business is growing – if at all. The automatically renewing (and rising) support costs may be having more of an effect than Oracle cares to mention.
With all these blurred lines and the decision to omit certain details, it’s easy to see how Oracle’s decision to paint with a broad brush could leave us assuming the success of its Cloud offering.
So, if quarterly sales for Oracle’s Cloud applications have grown so significantly, and the vendor has had its second-best year in nearly a decade, why did its share price drop by 5%?
Well, it would seem that Oracle’s quarterly revenue guidance didn’t quite paint the rosy picture the market desired. The drop in share price was as a result of lowered guidance issued by Oracle’s CEO, Safra Catz, as she announced plans to ramp up investment in the Cloud.
Catz stated Oracle anticipated achieving revenue growth of 3-5% for the fiscal year of 2022 as it was on track to double capital expenditure to around $4 billion. This was Oracle’s bid to drive forward its Cloud computing business amidst rising competition with Amazon and Microsoft.
Surely if Oracle (and the wider market) consider Cloud business to be the biggest driver of growth, then ploughing money into advancing this offering would be a sure-fire way to instil confidence in investors?
Oracle’s belief in the return from such investment is seemingly not mirrored, and the drop in share price is a tell-tale sign of the market’s limited faith in the mega-vendor to be able to meet expectations (a common theme with Oracle) and keep up with its Cloud competitors.
With Oracle playing its cards close to its chest, and the blurring of product lines preventing us from eking out the details, it’s rather tricky to ascertain how well the vendor is really doing in the Cloud world.
On the one hand, the vendor is telling us that sales have seemingly rocketed, and it has several hundred Cloud customers, but we’re not seeing this reflected in the market. It would seem the market is not overly enthused by the bigger picture for Oracle’s Cloud business as determined by the drop in share price.
Let’s take a second to harp back to those 750 customers that Oracle claims are currently using its Fusion ERP. That number is, to say the least, underwhelming. To offer some context, there are nearly 11,000 businesses, with more than 250 staff, in the UK alone that could be considered ideal prospects for Oracle’s Cloud. The global marketplace? Well now, that is a much bigger canvas so, as you can imagine, we’re looking at 150,000 businesses of this size as a minimum, suggesting Oracle has less than 0.5% of this market.
Perhaps Oracle hides the details of its Cloud adoption and usage from us because the figures are not such a pretty picture. For some organisations, Oracle’s Cloud offering might be missing the mark functionally. For others, a justification for the cost of the product just cannot be fathomed.
It was once said by Benjamin Disreali (and popularised by Mark Twain) that “there are three kinds of lies: lies, damn lies, and statistics.”
It’s worth mentioning that, then, the mega-vendor was more than happy to release the figures for other revenue streams, including on-premise licences, hardware, Cloud services, and licence support. So, it begs the question: why did Oracle opt to serve us a statistic (46%) and not release the same sales information for its Fusion Cloud ERP?
They say a picture paints a thousand words. We happen to think that Oracle’s lack of figures says an awful lot, too.