Recent Update on the Software and Semiconductor Industry

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Part 4
Recent Update on the Software and Semiconductor Industry PART 4 OF 10

The Rising Profile of Oracle Cloud

Cloud is a rising star for Oracle’s sales

At this point, Oracle (ORCL) may not be on the same level as Amazon (AMZN) or Microsoft (MSFT) in terms of sales but internally, the cloud is Oracle’s rising star.

The contribution of cloud computing to Oracle’s overall top line has been growing steadily. In our view, there is considerable potential for further growth given that the vast majority of Oracle’s license software customers have not converted to the cloud.

In fiscal 4Q17,1 the cloud business contributed 13% to the company’s top line, up from 8.0% in fiscal 4Q16. For fiscal 2017, cloud revenues comprised 12.2% of Oracle’s overall revenues, up sharply from ~7.8% in fiscal 2016 and 5.5% in fiscal 2015.

The Rising Profile of Oracle Cloud

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Cloud could rise to 25% of top line

KeyBanc Capital Markets analysts, who gave an “overweight” rating on Oracle stock, forecast that cloud sales could comprise 13% of the company’s revenues in the current fiscal year (fiscal 2018) and rise further to 25% of its revenues in fiscal 2019.

Synergy Research Group forecast that the global cloud and SaaS (software-as-a-service) services markets could be worth more than $200.0 billion by 2020. As shown in the chart above, the fastest-growing segment of these sectors is expected to be public IaaS (infrastructure-as-a-service) and PaaS (platform-as-a-service), which is forecast to expand at an average annual rate of 29% in the next five years.

SaaS is promising, but the competition is fierce

Although SaaS is Oracle’s strongest point, the company’s prospects in this market are complicated by the fact that the scene is crowded, and it is hardly the leader in the segment. In SaaS, Oracle is confronting other formidable contenders such as Salesforce (CRM), Amazon, Microsoft, and Alphabet’s (GOOGL) Google.

  1. fiscal 4Q17 ended May 31, 2017

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