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Why Oracle Expects Improved Software and Platform Growth Ahead

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Strong cloud bookings enhanced Oracle’s guidance for cloud revenue

Earlier in the series, we discussed Oracle’s (ORCL) growth in the cloud space, which was reflected in its recently announced fiscal 4Q16 and fiscal 2016 results.

Oracle said that strong cloud bookings in fiscal 4Q16 enabled it to raise its cloud revenue guidance. The company now expects 65% or higher growth in its cloud SaaS (software-as-a-service) and PaaS (platform-as-a-service) space in fiscal 2017 in constant currency terms. Oracle added ~1,600 new SaaS customers and over 2,000 new PaaS customers in fiscal 4Q16.

Not one to leave Workday (WDAY) out of the discussion, Larry Ellison, Oracle’s CEO, stated, “Oracle has nearly 2,600 Fusion ERP customers in the Oracle Public Cloud — that’s ten-times more cloud ERP customers than Workday.”

Indirectly bringing Salesforce (CRM), which aims to record $10 billion revenue by 2018, into the discussion, Ellison further stated, “That gives us a fighting chance to be the first cloud company to reach $10 billion in SaaS and PaaS revenue.”

In fiscal 1Q17, Oracle expects 2%–5% YoY growth in constant currency terms in overall revenue. It expects its earnings per share (or EPS) to be in the $0.56–$0.60 range. Analysts expect 2% dollar-based revenue growth and $0.59 EPS for Oracle in fiscal 1Q17.

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Oracle’s initiatives to maximize its cloud growth

Through strategic acquisitions and new product offerings, Oracle is trying hard to scale up in the cloud space.

In late March 2016, Oracle announced Oracle Cloud at Customer, a hybrid cloud structure in which a client can run a workload on-premises or in the Oracle cloud.

In May 2016, Oracle announced that it had acquired Italy’s (EWI) Opower (OPWR) and Textura (TXTR) to expand its cloud portfolio. Oracle believes that Opower’s acquisition will enable it to become the “largest provider of mission-critical cloud services to utilities,” while Textura will enhance its position in the construction space.

Despite prevailing uncertainty and shrinkage in corporate technology budgets, cloud adoption is on the rise as businesses and organizations continue to shift their computing and software capabilities to the cloud. Thus, Oracle is strategically timing its acquisitions in the cloud space to benefit from increasing cloud adoption.

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