Oracle SaaS grows big, but analyst says not much of it is really new

Mark Fontecchio

Oracle announced that it added more than 500 new Software as a Service (SaaS) customers in the last quarter, though an analyst thinks most of them are existing Oracle customers and those gained in acquisitions.

The Redwood Shores, Calif.-based IT company reported quarterly earnings on Thursday, announcing that total revenue was up 2% since the same quarter last year, and software revenues were up 5% year-over-year.

However, most of Oracle's growth is its "existing client base and acquisitions (more) than net new standalone sales," according to Chad Eschinger, research vice president at Stamford, Conn.-based Gartner Inc. That said, Eschinger added that Oracle continues "to be a strong provider with a growing presence in SaaS."

There has been much talk that a large portion of Oracle's cloud business has come from acquisitions, particularly Taleo. Oracle CEO Larry Ellison sought to discount those rumors during the quarterly earnings call.

"We added more new Fusion core HCM customers last quarter than Workday added HCM and CRM customers," he said. "That's just Fusion, not Taleo."

Ellison and other company executives added that Oracle will make a major cloud-related announcement next week. Following a question about Oracle Database 12c, which is in beta but hasn't been released generally, Ellison expanded on what those announcements would include. He said Oracle will announce partnerships with "the largest and most important SaaS companies

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and infrastructure companies in the cloud." The partnerships are expected to be with, NetSuite and Microsoft.

Meanwhile, Oracle announced that hardware revenue was up 15% since the last quarter but down 9% from the same quarter last year. Company executives continue to claim that Oracle hardware will soon be a "growth story." Ellison said the company has basically eliminated its x86 server and storage resell business, and so the revenue declines will end.

Oracle claimed that hardware revenue would grow overall in the next fiscal year, although not everyone is that optimistic.

"Oracle’s hardware should be bottoming out but I’m currently conservative in a short-term view of significant growth during fiscal 2014," Eschinger said.

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