Oracle Corp’s ORCL latest third-quarter fiscal 2017 results revealed the company’s continuing domination in the cloud-based Enterprise Resource Planning (ERP) market. The company stated that 564 new customers had selected its ERP solutions (excluding Netsuite) of which 120 were expansions.
More importantly, 50% of these customers were first-timers to the company’s platform, which reflects continuing market share win. Oracle named well-known companies like ClubCorp, Cummins, Lufthansa and Dish Network, which selected its ERP solutions during the quarter.
Organically, ERP revenues surged a massive 280% in the reported quarter. Oracle’s active base of ERP customers is on track to reach 4K, which is an important milestone amid intensifying competition from the likes of Workday WDAY and SAP SE SAP.
We note that Oracle touched a new 52-week high following the impressive results. (Read More: Oracle Beats on Q3 Earnings & Revenues; Stock Up)
Oracle Corporation Price, Consensus and EPS Surprise
Oracle Corporation Price, Consensus and EPS Surprise | Oracle Corporation Quote
Shares have also outperformed the Zacks Computer Software industry on a year-to-date basis. While Oracle returned 19%, the industry gained 9.3% over the same period.
Netsuite: Most important Cog in the ERP Wheel
During the conference call, Oracle’s Chief Executive Officer (CEO) Mark Hurd acknowledged Netsuite ERP as its “biggest pillar” for future growth in the ERP market. This should help calm down nerves of Netsuite customers, who may have thought of discarding Netsuite ERP solutions, post its acquisition by Oracle.
Traditionally, Oracle is not well-known for maintaining high-levels of customer satisfaction, which had prompted many customers to select rival solutions. Sensing that this trend can worry existing Netsuite customers, Chairman and Chief Technology Officer (CTO) Larry Ellison had vowed during the acquisition that he will pull out all stops to stay ahead of rivals, according to The New York Times.
Moreover, the acquisition will help Oracle expand into the small and medium business (SMB) segment, where it does not have a strong presence. Per Bloomberg, NetSuite had more than 30K customers at the time of acquisition, the bulk of which were SMB companies.
Cloud Remains the Key Catalyst
Be it ERP, HCM or CX applications, growing adoption of Oracle’s cloud solutions is the key growth driver in the long run. During the call, Larry Ellison noted the superiority of Oracle’s Gen 2 Infrastructure-as-a-service (IaaS) cloud in running large databases at cost-effective terms in comparison to Amazon AMZN IaaS.
Although we note that Amazon remains a leader in the IaaS market segment, Oracle is fast catching up. Management at Oracle believes that IaaS will soon grow faster than Software-as-a-Solution and Platform-as-a-solution (PaaS) services and will eventually become the largest cloud business.
We note that IaaS is expected to grow in the range of 25%–29% for the fourth quarter of fiscal 2017. At the same time, SaaS and PaaS revenues, including NetSuite, are expected to grow in the range of 69% to 73%. Increasing attachment between PaaS and IaaS order trend is significantly positive in this regard, which will further boost customer base going ahead.
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