Oracle's Q4 results: What to watch for

Software revenue growth, Fusion apps uptake and the travails of Oracle's business may get some scrutiny

Oracle CEO Larry Ellison. Image credit: Oracle.

Oracle CEO Larry Ellison. Image credit: Oracle.

Many eyes in the tech world will fall on Oracle later this week, when the vendor's fourth-quarter results are set for release. This is typically the biggest reporting period for Oracle each year in terms of revenue, but a number of questions loom beyond its top-line performance.

Here's a look at some of the topics Oracle CEO Larry Ellison and other executives may discuss or be asked to address during Thursday's conference call on the results.

New software purchases versus maintenance: Oracle has consistently made sure to highlight its strong software maintenance revenue, which existing customers pay each year for support and updates. Maintenance fees carry extremely high profit margins for Oracle and other software vendors.

But another key metric to watch is new software license revenue. Growth in this area says customers are broadening their investments in Oracle software, whether by adding licenses for their existing implementation or trying out newer products.

Oracle has begun reporting new software licenses sales in tandem with cloud software subscription services as it moves further into the SaaS (software as a service) market. Last quarter, revenue in the combined category fell 2 percent, which along with a 1 percent drop in overall revenue led to some shaky nerves on Wall Street.

This time around things should be different, analyst firm Canaccord Genuity said in a report issued Monday. "Our research indicates that aggregate software demand improved sequentially from [the third quarter]," the report states. "However, there are treacherous pockets of weakness. We expect Oracle to navigate those challenges and post at least a consensus quarter."

Hardware ho-hum?: A less likely outcome of Thursday's results is a sudden turnaround in Oracle's hardware revenue, which have fallen consistently since the acquisition of Sun Microsystems. Oracle has maintained it is focused on higher-margin systems like Exadata, rather than commodity servers. During its third-quarter earnings call, CFO Safra Catz said customers had also been waiting for new Sparc-based systems to be released, and Ellison himself told analysts not to expect a turnaround until the first quarter of Oracle's fiscal 2014.

Fusion Applications update: One thing is for sure: Nobody can accuse Oracle of over-hyping the success of its next-generation Fusion Applications. To the contrary, its public remarks on uptake of Fusion have suggested industry watchers should manage their expectations, as installed-base customers of older applications adopt modules incrementally, particularly in SaaS form.

Oracle has said there are more than 400 Fusion customers, but many observers will be looking for an updated figure, as well as some color regarding how many have gone live, compared to ones in mid-implementation, and which types of modules they are choosing.

Cloud clout: While cloud-based software revenue remains a very small percentage of Oracle's overall revenue, one thing to listen for is whether Ellison and crew announce any customer wins in SaaS that involve global deployments. Competitors such as Workday, which Oracle competes with in HCM (human capital management) and financials software, have been able to raise eyebrows with a series of mega-deals. If Oracle can do the same it will provide more validation for its cloud offerings, as well as bragging rights.

Tracking database 12c: Oracle had been expected by now to announce the general availability of its next-generation 12c database. While earlier this year, word leaked that beta testing had been completed on 12c and a release was imminent, no announcement has been made. It's not outside the realm of possibility that Ellison will make such an announcement during the call as Oracle begins a new fiscal year.

Trash talk targets: Ellison in particular tends to dish out plenty of competitive trash talk during earnings calls, with Salesforce.com and Workday often receiving the brunt of it. Such banter is to be expected. But in Oracle's case, the target chosen is telling, usually being "the company they're most worried about," said Forrester Research analyst China Martens.

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

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Chris Kanaracus

IDG News Service
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