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With a chance to chat with Oracle ( ORCL ) customers during its Chicago trade show that ends Thursday, Evercore ISI analyst Kirk Materne came away more convinced that the legacy software leader has its head in the fast-growing cloud. And atop Oracle’s head is a “halo for more cloud uptake,” UBS analyst Brent Thill said in a separate research note. Not that Oracle investors necessarily agree. Oracle stock was down 1.5% in early afternoon trading in the stock market today , near 40. Rival Workday ( WDAY ) was down about 1%, but upstart enterprise software competitor ServiceNow ( NOW ) was up a fraction. Beginning with Oracle’s fiscal 2017, which starts June 1, its cloud “contribution to overall revenue growth will more than offset the declines in the new software license business (or in a more bearish scenario, essentially cancel out the license declines), which we expect to be a 2% headwind to total revenue growth,” Materne wrote in a research note Thursday. By cloud, he means software as a service (SaaS) and platform as a service (PaaS), the popular pay-a-little-as-you-go model that is supplanting large, long-term license fees for software running on-premise enterprises and databases. “And as the base of new license revenue gets smaller, in FY ’18 we project that new software license declines will negatively impact revenue growth by just 90 (basis points),” Materne said. His parsing of the numbers, customer satisfaction and co-CEO Mark Hurd’s commentary came out of the HCM World conference, where some of Oracle’s 6,000 Fusion HCM (human capital management) clients began gathering Tuesday at the Hyatt Regency Chicago to compare notes. Not that they’re all up and running with the new software. It’s a process. Materne said only about 1,000 “core” human resources customers have gone “live” with Fusion HCM. Others are gearing up. Workday Sees Oracle Lagging The lag time between landing a customer and fully implementing the software was on Workday CEO Aneel Bhusri’s mind during his last quarterly conference call when he said bluntly that Oracle has “had time to get customers into production and hasn’t been able to, (while) 75% of our customers are in production. That’s actually the real driver behind win rates.” UBS analyst Thill, in his research note Thursday, counted 600 live customers of Oracle’s latest Fusion HCM release, including Schneider Electric, BT Group ( BT ) and Siemens ( SIEGY ). He said the “pace of go-lives (is) improving as sales/post-sales motions have matured. “Cloud uptake (is) begetting more cloud (with) better attach rates of other cloud solutions,” Thill said, adding that about 50% of Oracle’s midsize HCM customers are also buying Oracle’s financial management SaaS. Besides, Oracle’s “international prowess (is) underappreciated, with some of the biggest opportunities outside the U.S.,” he said. Oracle supports seven “global payrolls” with software in 24 languages in 199 countries, Thill said. While cloud growth might “offset” legacy sale slippage, cloud products won’t outsell on-premise revenue anytime soon. In Oracle’s Q3 ended Feb. 29, total revenue fell 3% to $9 billion, due largely to currency headwinds. SaaS and PaaS sales rose 57% from a year earlier to $583 million, as legacy on-premise software slipped 1% to $7.1 billion, although the latter was up 3% in constant currency. For the current Q4 ending May 31, analysts polled by Thomson Reuters expect Oracle to report earnings per share minus items of 82 cents, up 5%, on revenue of $10.46 billion, down 2.3%. Scalper1 News
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