Although the cloud is generally viewed as the future of IT services, not all companies were equally quick to respond to this paradigm shift. This is a problem, as its legacy business, while large, is slowing down.
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NetApp, Inc. (NASDAQ:NTAP) released new details about its NetApp Insight® 2015 technical conference, a one-of-a-kind education and networking experience taking place October 12 to 15 in Las Vegas and November 16 to 19 in Berlin. Some analysts question that it depends upon how Oracle strike the balance between cloud offerings and traditional business customers.
San Francisco-based social media company Twitter Inc (NYSE:TWTR) will now allow users to make political donations via a partnership with mobile payments company Square. For the quarter, this contribution was at around 29%. But in constant currency, revenue actually rose 7%. Now investors want to see the results.
Morgan Stanley maintained it as Overweight, but cut the target to $45 from $50.
Under Armour, Inc. (NYSE:UA) witnessed a decline in the market cap on Monday as its shares dropped 0.46% or 0.44 points. Sales in the company’s hardware division fell 3 percent. Despite the lack of a secular growth story, we think Oracle’s cloud assets will defend against disruption, and the firm should benefit from continued increases in the IT spending mix toward software and away from hardware. It has recognized this fact, albeit rather slowly, and is now moving toward the cloud as a means to sustain sales growth. The company operates through two segments, Completion and Production, and Drilling and Evaluation. Their recurring revenue has reached 73% of total revenue, providing a strong foundation for long-lasting growth. The software company itself had projected the revenue to grow between 39-43% for this segment.
“Overall, the story is incrementally improving, as strong gains in cloud are beginning to outrun declines in on-premise software”, he said in his note.
Secondly, the division’s revenue is simply dwarfed by major players like AWS. Short-term deferred revenues increased 10 percent at constant currency rates to United States dollars 9.1 billion. Further, revenues from a cloud subscription model are realized over a period of several years, which remains a drag in the near term. “With all that customer growth on top of our existing infrastructure, we expect that our cloud margins will double from 40% to 80% over the next two years”, he said. This is an ambitious target, considering the 21.4% margin AWS clocked for its most recent quarter.
Those companies that were relatively late to move into the cloud are clearly feeling the impacts of this inaction. Another risk is that Oracle may find it challenging to earn its cost of capital in the hardware business.
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“All in all, Oracle is under intensifying attack on multiple fronts”, wrote TechMarketView analyst Angela Eager, pointing to threats from rivals Salesforce, Workday and SAP, as well as the investment Oracle is making in transitioning to the cloud.
