Tag Archives: orcl

SAP’s Strong Pipeline Into Q2 Keeps Stock Near Recent High

While SAP ( SAP ) late Friday preannounced Q1 earnings and revenue that missed Wall Street views, investors Monday were buoyed by the German enterprise software company’s assurances that its pipeline is flowing strongly into Q2. SAP stock was up a fraction, near 77, in afternoon trading in the stock market today, just 7% off an 18-month high of 82.70 set July 25. In its release Friday, SAP CEO Bill McDermott said he expects “increasing momentum” in 2016. Shares of rival  Salesforce.com ( CRM ) were down a fraction Monday afternoon, but rival  Oracle ( ORCL ) was up a fraction. With final Q1 results scheduled for release April 20 before the open, SAP issued preliminary earnings of 0.64 euros per share minus items (73 cents at Monday’s exchange rate), up 9%, where Wall Street analysts expected 0.70 euros. It said revenue rose 5% to 4.73 billion euros (or $5.39 billion), short of the 4.85 billion euros and 4.82 billion euros that Evercore ISI and Wall Street projected, respectively, observed Evercore ISI in a research note. One euro was worth about $1.14 Monday. In a research note Sunday, Evercorse ISI analyst Kirk Materne said he’s looking for “more color” from SAP on April 20,  but “we expect the (Q1) license shortfall and comments around a slower start in the Americas are going to pressure shares on Monday despite SAP reiterating its full-year guidance and the comments around a ‘strong (Q2) pipeline.’ ” Materne maintained a buy rating on SAP stock, but said “we continue to favor Oracle ( ORCL ) and Microsoft ( MSFT ) in  mega-cap software.” RBC Capital Markets analyst Ross MacMillan maintained a sector perform rating on SAP stock but lowered his price target to 78 from 81. MacMillan noted that SAP’s Q1 cloud bookings of 140 million euros rose 22% year over year, and more than 25% in constant currency. “We view this as slightly disappointing” following Q4’s 75% “organic growth,” less than 50% in constant currency, “although do note that (Q1) is a seasonally weak quarter,” MacMillan said. “SAP also added over 500 new S4HANA customers, of which around 30% (i.e. about 150) are net new. While well below about 1,400 customer adds in (Q4), we would expect (Q1) to be seasonally weaker.” He said weakness in the energy sector and “some pull forward of demand” in Q4 due to S4HANA product promotions drove SAP’s softness in Q1. “As a result, we think there is limited read-through for other companies in enterprise software.” Got that, Salesforce.com sellers? “SAP’s fundamental growth drivers are rock solid, from our best-in-class S4HANA applications to our completeness of vision in the cloud,” said SAP’s McDermott in Friday’s release. “We expect increasing momentum as the year progresses, fully consistent with our guidance for the full year. SAP continues to be a highly profitable growth company.” HANA is SAP’s linchpin business software suite. CFO Luka Mucic said the Americas, dragged by Brazil, “got off to a slower start.”

Oracle Cloud Should ‘More Than Offset’ Slip In New Licenses In ’17

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%.

Workday May Hit $5 Billion In 5 Years As Financial Software Rises

At the rate Workday ( WDAY ) is growing its core human capital management (HCM) software, combined with its new financial management products, analysts Ross MacMillan and Matthew Hedberg can see Workday’s path to $5 billion in yearly sales by 2021. The company just hit it first billion-dollar year, closing its fiscal year ended Jan. 31 with sales of $1.16 billion. The pair of RBC Capital Markets analysts on Sunday raised their price target on Workday stock to 92 from 72 and affirmed their outperform rating. Workday stock rose a fraction Monday to a 2016 high, making its seventh consecutive up-day, closing at 78.92. Last week, Workday stock broke out of a cup-with-handle at a 75.60 buy point. Workday wasn’t alone Monday. Rival ServiceNow ( NOW ) rose 3.6%  to 64.28 on a bullish report from William Blair on its long-term fundamentals. Bigger enterprise software rivals Salesforce ( CRM ), Oracle ( ORCL ) and SAP ( SAP ) all slipped a fraction. RBC’s MacMillan and Hedberg drew confidence by comparing Workday to PeopleSoft in 2001, four years before its HCM and financial management (FM) software businesses were acquired by Oracle for $10.4 billion. PeopleSoft co-founder David Duffield, who fought the Oracle takeover, went on to co-found Workday. “A look back at PeopleSoft is striking,” they said. “Workday today has (less than) 25% of PeopleSoft’s customer count in 2001, yet Workday has (more than) 50% of PeopleSoft’s revenue at that time. This is particularly interesting, given Workday has yet to generate any meaningful financial management revenue today and which (according to management) was (more than) 50% of PeopleSoft’s revenue at the time of acquisition by Oracle.” In other words, the RBC analysts say, Workday has plenty of room to grow. “Success in financials would support a path to $5 billion,” they wrote. “While financials (are) not the focus in this note, we think the path to $5 billion revenue remains underpinned (split less than 50% HCM, more than 50% FM) which we think can be realized in the next 5-plus years.” For its fiscal 2016 ended Jan. 31, Workday revenue rose 48% to $1.16 billion. It lost 1 cent per share minus items, a huge improvement from a 33-cent loss in fiscal 2015. Analysts polled by Thomson Reuters expect a Q1 per-share loss minus items of 2 cents, on revenue up 35% to $339 million. They expect adjusted profit to break into the black in Q3.