Oracle sets sights on cloud cash cow in shift from perpetual licensing

Oracle reports Q4 operating income of $4bn on revenues of $10.7bn as it turns from software licensing towards 'stunningly profitable' cloud business

Oracle stated cloud software as a service (SaaS) and platform as a service (PaaS) revenues of $416m – showing 29% growth – in its fourth quarter (Q4) results.

Cloud infrastructure as a service (IaaS) revenues were $160m – showing sector growth of 25%.

Oracle's results were affected by the strong US dollar, saying its Q4 revenue was 5% lower than expected because of currency fluctuations.

The company used its Q4 results to emphasise the shift to cloud computing.

Far from being a way to run systems cost effectively, Oracle chairman Larry Ellison boasted to Wall Street analysts that SaaS and PaaS would be "stunningly profitable" for Oracle.

In a transcript of the Q4 earnings call posted on the Seeking Alpha financial site, Ellison responded to a question about SaaS revenue: "What’s the profitability on SaaS and PaaS? This is going to shock you... It’s stunningly profitable."

Ellison said a  $1m perpetual software licensing contract over 10 years would yield $2m in maintenance revenue, yielding a profit of almost $3m. But he said of a Saas or Paas deal: "The $1m deal is worth $10m or more than three times as much as the licence deal over a 10-year period – over triple the value."

While adoption of Oracle’s 12c database was strong in North America, Oracle CEO Safra Catz said: "Our Europe new licensing figure was down a lot."

Regarding the company’s ongoing support contracts depreciating as more businesses shifted to Oracle cloud products, Catz said: "Many of our customers are not cancelling support and moving everything to the cloud overnight. They are adding cloud capabilities. 

"What would happen invariably is – even when they add something in the cloud that they did on-premise – they have other uses for many of our licenses they’ve had before."

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