Category Archives: Financial Results

Enterprise IT, Financial Results, HPE, News & Analysis, quarterly results

Whitman thanks partnerships for strong HPE Q1

HPE street logoHewlett Packard Enterprise (HPE) has claimed earnings of $300 million in its first quarter of 2016 show it is shaping up for the cloud more strongly than expected.

HPE CEO Meg Whitman claimed that the success of the company was a consequence of a strong product offering. “Our portfolio is truly the best we’ve had in years and is driving strong customer traction,” said Whitman, who claimed the company was in better shape for the cloud, describing it as ‘agile and nimble’. In January BCN reported how HPE is faced with making 72,000 more redundancies this year, according to IT market watcher Trip Chowdhry at Delaware-based Global Equities Research.

The results created earnings of 41 cents per share in HPE, exceeding the expectations of Wall Street analysts, who reportedly expected non-GAAP earnings of 40 cents a share. While Wall Street had estimated HPE’s revenue to be $12.68 billion, the unexpectedly good revenue figure was marginally higher, at $12.7 billion.

According to HPE, the earnings for the next quarter could be as high as 43 cents a share.

Whitman told analysts that HPE is in a much better position, being the main infrastructure provider for SAP HANA with double the number of shipments of its nearest competitor. Another important deal, with Canadian comms company Rogers, helped HPE establish its credential as a leader in creating hybrid cloud infrastructures for enterprises as the move away from their existing traditional IT systems. In January BCN reported how hybrid cloud management is the main focus of HPE’s cloud strategy.

Meanwhile, HPE’s networking revenue showed 62% growth on the same period last year. This was attributed to the acquisition of wireless networking specialist Aruba Networks in March 2015, which has created record revenue from China revenue performed well in other regions. “We are seeing strength in China,” said Whitman. Aruba also grew double digits at an operational level and the vendor enjoyed demand for HPE’s switching portfolio to complement Aruba’s wireless offerings.

Enterprise group revenue was up 1% on the equivalent period in 2015, at $7.1 billion. Networking revenue grew by 54%, through Aruba’s wireless tech sales, however server and storage sales declined, falling by 1% and 3%. More worryingly perhaps, enterprise service revenue is also in decline, falling by 6% to $4.7 billion, while software revenue dropped by 10%.

AWS, Financial Results, News & Analysis, Rackspace

Rackspace grows Q4 2015 net revenue 11%, hopes riding on AWS performance

Rackspace logoRackspace has reported results that surpassed expectations for the final quarter of 2015 but it acknowledged its faces an uphill struggle and fortunes may now be tied to Amazon Web Services (AWS).

Though the Texas-based managed cloud company reported net revenue for the fourth quarter of 2015 to be up by 10.7% on the same period in 2014 it expects a fall in the next financial quarter. Rackspace predicted that the Q4 revenue total of $523 million will fall to around $517 million in the next quarter (Q1 2016). For the full year of 2016, Rackspace expects revenue to be between $2.08 billion and $2.16 billion.

Top of the highlights that Rackspace listed for the year 2015 was the strategy to support AWS, Microsoft’s Azure public cloud and Microsoft Office 365. These moves will open up ‘huge and fast-growing new markets’, predicted CEO Taylor Rhodes. “We intend to be the number one managed services provider for AWS, and we are well on our way toward that goal.”

Outsourcing has made the company more dynamics, according to Rhodes: “Our business is becoming less capital intensive, resulting in higher free cash flow.”

Capital efficiency initiatives helped Rackspace reduce capital expenditures to 23% of its revenue, and the company’s adjusted free cash flow rose to $196 million for 2015. Rackspace shared its increased Adjusted Free Cash Flow with stockholders through a major share buyback that is still underway.

Since the October launch of Rackspace Fanatical Support for AWS, Rackspace has won 100 customers, while its technical support team has collectively earned 230 AWS technical certifications and more than 1,100 business and technical accreditations. In January 2016 Rackspace appointed Brian Stein as its new head of global engineering. According to Rhodes, the support team is the key to expansion, as it aims to sell its managed services customers more products. The tide of recent events has seen incremental workloads go to AWS, which slowed growth but Rackspace’s new multi-cloud portfolio can “reignite that essential part of our growth engine,” Rhodes said.

Of the AWS customers Rackspace has signed, 70% have chosen Rackspace’s highest service level, Aviator. “This indicates we are adding significant value on top of the AWS infrastructure,” said Rhodes.

AWS, Financial Results, News & Analysis

AWS posts most profitable quarter ever

amazon awsAs investors reportedly grow nervous with its parent company, Amazon Web Services has reported its most profitable quarter ever.

Though sales of Amazon Web Services (AWS) grew 69% and profits tripled, the stock of parent company Amazon.com fell by 10% in pre-market trading after its latest earning report, but it had jumped by 8% during Thursday trading.

The fall in market valuation of Amazon.com, described on Wall Street as a readjustment of ‘outsize expectations’ following Amazon’s previous declarations about cost management and investment in infrastructure, is unlikely to affect the cloud services business however.

Meanwhile, the AWS unit saw its quarterly operating profit triple to $687 million, after sales revenue for its latest quarter rose 69% to $2.4 billion. This represents a decline in growth rate, which was 78% in the previous three months. AWS brought in $687 million in operating income for the quarter, in comparison to the $240 million revenue that was made in the corresponding quarter last year. The operating expenditures for AWS for the quarter came in at $1.78 billion, up from $1.18 billion a year earlier.

Though the rate of expansion may be slowing, AWS is still the fastest growing division within Amazon and in an unassailable lead in the cloud infrastructure market, according to Richard Brown, Senior VP for EMEA at Interactive Intelligence.

“Amazon’s latest financial results show that demand for cloud computing is booming and provides insight into the changing behaviours of organisations as they move to the cloud. To keep their foothold in this growing market, cloud vendors like Amazon, Google and Microsoft are prioritising work on their cloud platforms.”

Direct comparisons with AWS rivals such as Microsoft Azure, Google Cloud Platform and IBM SoftLayer are difficult as their parent companies’ financials are structured differently.

On January 18th BCN reported how increasing price competition among the top three cloud service providers may affect profitability in the cloud market in coming months.

This year, BCN reports, AWS plans to add 5 AWS regions and 11 Availability Zones to its current estate of 32 Availability Zones across 12 geographic regions worldwide, with new sites in London, China and India.

Financial Results, Microsoft Azure, News & Analysis

Cloud now makes up one third of Microsoft revenues as Azure soars

AzureMicrosoft made $9.4 billion from cloud computing in its last quarter with the 140% rise of Azure revenue surpassing expectations and over shadowing other areas of business.

Yesterday Microsoft released the figures for its quarter ending on December 31, 2015 (Q2 in its 2016 financial year). With total revenues of $25.7 billion, income from cloud computing now represents over a third of its fortune. Microsoft’s stock rose in value by 7% following its earnings announcement.

The latest cloud revenue figures show a $1.2 billion rise on the previous quarter, which saw $8.2 billion revenue on cloud deals. This represents a growth rate of 14.6% every quarter, which suggest that it cloud revenue could surpass its own expectations. Microsoft has previously predicted that its cloud revenue will rise to $20 billion in 2018.

Microsoft CEO Satya Nadella argued that the numbers of businesses that are piloting Windows 10 leads it to expect that it will be installed on over 200 million active devices in the coming year. “Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas,” said Nadella.

The cloud outshone all other areas of the business. While revenue from server based products rose by 10%, Azure revenue grew 140%. Office 365 now has 20.6 million subscribers, which was a major contributor to the success of the sales of Productivity and Business Processes (PBP), which rose to $6.7 billion in value, from $6.3 billion in the last quarter. The service revenue from the Intelligent Cloud (IC), grew from $5.9 billion to $6.4 billion over the same period.

Sales in the More Personal Computing category, taking in Windows, Devices, Gaming and Search, went from $9.4 billion to $12.7 billion, a rise of 25.9%, even in the teeth of a 49% fall in phone revenues. Meanwhile, Microsoft reported that its success in monetizing its search advertising had grown by 29%, which it attributed to the integration of search into Windows 10.

Microsoft returned $6.5 billion to shareholders in dividends.

Financial Results, IBM, News & Analysis, Quarterlies

IBM Q4 figures indicate painful cloud transition

IBMAnalysts have warned that IBM faces a transformation that could make it a leaner operator – and potentially meaner one for staff.

IBM’s reported on revenue of $22.1 billion for Q4 of 2015, down 9% compared to the same quarter last year, indicate that its cloud and analytics sales growth is failing to offset declines in traditional business. The $4.5 billion earnings on that revenue, however, were better than expected by Wall Street analysts.

Total cloud revenue for the IT vendor and cloud service hybrid was $10.2 billion, but its as-a-service sales were $4.5 billion. According to IBM it has a run rate of $5.3 billion for cloud delivered as a service and its analytics revenue was up 7% on the same period in 2014.

With IBM now generating 35% if its sales income from cloud, analytics, mobile, social and security it’s in the middle of a painful turnaround which has led to a prolonged period of underperformance, according to Wall Street analyst Kulbinder Garcha at Credit Suisse. Large parts of IBM’s traditional business are being cannibalised by the Cloud, warned Garcha. The sales of hardware, operating systems and non cloud services are still a significant part to IBM’s vital functions, said the analyst, since they account for more than 40% of IBM’s business.

As enterprises move to the cloud, there is a danger they will migrate to one of the big three cloud suppliers with IBM still in transition, said analyst Clive Longbottom, service director at Quocirca. However, enterprises may prioritise the value of IBM’s consultancy skills over the lower prices of the top three cloud service providers (AWS, Googe and Azure) according to Longbottom. “I still believe that IBM will remain a major force in the IT world, it just has to make sure it positions and messages itself effectively to its existing customers and to its prospects,” said Longbottom.

There is still a danger for IBM staff as the company enters a stage of metamorphosis. “IBM’s cost of sale for cloud will be lower than its cost of sale for hardware, operating systems and software in the old world, which is good for the company. “However, this will also result in a lot of excess human resource fat in the company,” said Longbottom. “Expect redundancies leading to a far leaner IBM in the future.”

Financial Results, News & Analysis, SAP

SAP claims earnings doubled expectations, announces plans to unify brands

SAP1As SAP’s year-end figures were published the cloud giant has unveiled plans to clarify the positioning of all its cloud offerings in an open letter to customers.

SAP said the preliminary figures for its financial year ending on December 31st outpaced the growth of the rest of the cloud industry and exceeded its own expectations.

SAP’s non-IFRS cloud and software revenue grew by 20%, double the original outlook of 8 to 10% growth. The ‘exceptional momentum’ claimed by SAP will be even great next year, it claimed, as cloud sales bookings increased by 103% in the full year to $0.97bn (€0.89 billion) and 75% in the fourth quarter to $0.35bn (€0.35 billion). Cloud subscriptions and support revenue was $2.49 bn (€2.30 billion) for the full year and Operating profit was $6.89 bn (€6.35 billion).

Use of the in memory platform SAP S/4HANA doubled each quarter, claims SAP, which has 2,700 customers by the end of 2015. “We decisively beat our full year guidance for cloud and software revenue,” said Bill McDermott, CEO of SAP.

Based on these figures, the outlook for next year should see faster growth, predicted SAP. Cloud subscriptions and support revenue are projected to be up to $3.31bn (€3.05 billion), which would represents a growth rate of 33%. Meanwhile, non-IFRS cloud and software revenue will increase by up to 8% on the 2015 total of $18.69 (€17.23 billion). Operating profit, it said, will be around the same as 2015’s total, with maximum expectations being $7.27Bn (€6.7 billion).

A key to managing operating profit will be a simplification of SAP’s software portfolio, explained Chief Marketing Officer Maggie Chan Jones on the SAP web site.

“Our portfolio for digital business has also expanded through acquisition and we are stronger for customers, partners and ourselves,” said Jones. That growth needs to be managed, Jones warned.

In 2016 SAP will bring its acquired companies closer together under a unified SAP brand that includes Ariba, Fieldglass, Hybris and SuccessFactors. The acquisitions will now be known as SAP Ariba, SAP Fieldglass, SAP Hybris, and SAP SuccessFactors respectively.

Jones claimed this will bring clarity to customers and ecosystem partners across all ‘touch points’. “Our goal is to deliver a simpler, superior customer experience, with all the SAP brands going to market with a consistent, unified look and feel,” said Jones.

Enterprise IT, Financial Results, News & Analysis, Oracle, Platform as a service, Software as a service

Oracle cloud sales boom but at what price?

Oracle plane However Oracle’s co-chief executive Safra Catz warned fiscal 2016 will be “a trough year for profitability as we move to the cloud.”

Oracle’s total revenues were down by 6% to $9.0 billion with the sales of ‘cloud plus on-premise software’ down 4% to $7.0 billion. Meanwhile, total cloud revenue has gone up in the last quarter by 26% (in US dollars) and Oracle made $649 million on pure cloud software. The two most successful categories of cloud software for Oracle have been SaaS and PaaS which accounted for $484 million, a rise of 34%. Cloud infrastructure as a service (IaaS) revenue was $165 million, a rise of 7%.

Expect the SaaS and PaaS revenue to grow by 50% in Q3 and 60% in Q4, said Catz. According to Oracle it won 100 Fusion Human Capital Management system contracts and over 300 Fusion Enterprise resource planning deals in the last quarter. Oracle said it is on target to sell and book more than $1.5 billion of new SaaS and PaaS business this fiscal year.

“We now have more than 1,500 ERP customers in the cloud, that’s at least ten times more ERP customers than Workday,” said Oracle’s other joint CEO, Mark Hurd. “It was a very strong growth quarter for our cloud business, with SaaS and PaaS bookings up 75% in constant currency and billings up 68% in U.S. dollars.”

Not everyone in Wall Street is convinced however. “While the company is showing some signs of cloud success, the meat and potatoes legacy database and app business is under major secular pressure,” FBR Capital Markets analyst Daniel Ives told MarketWatch.

Oracle’s Board of Directors declared a quarterly cash dividend of $0.15 per share of outstanding common stock.

Adobe, Content & Applications, Creative Cloud, Financial Results, News & Analysis, Software as a service

Adobe posts 22% Q4 revenue growth, driven by Creative Cloud

AdobeAdobe Systems has claimed it is only just starting to gain from cloud adoption, after reporting record earnings.

Strong growth in subscriptions to Adobe Systems’ Creative Cloud has contributed to the ninth consecutive quarter in which the software vendor topped market expectations, as it reported revenue of $1.31b in Q4 of the fiscal year ending in November 2015. Of this, revenue from its digital media business, including Creative Cloud, rose by 35% to $875.3 million.

The vendor added 833,000 new subscribers to the Creative Cloud in the three months ending in November, some 150,000 more than market analysts expected. Meanwhile, Adobe Marketing Cloud brought in $352 million in revenue thanks to an unexpectedly strong adoption of its software as a service (SaaS) offerings.

Adobe’s strong growth from Creative Cloud has come as enterprises and professionals have adopted the new model of purchasing apps like graphic design tool Photoshop, web design software Dreamweaver and web video building application Flash. According to Adobe 52% of its customers subscribe to the full Creative Cloud bundle, with the remaining 48% subscribing to individual products within the portfolio.

Adobe Systems’ Photoshop Lightroom is now the fastest growing app in its Creative Cloud, CFO Mark Garrett told Reuters. “It’s growing the most because it’s attracting hobbyists and consumers,” he said. Since these were people that would never buy Adobe’s products before, the Creative Cloud and the switch from traditional licensing to web based subscription has expanded its market, Garrett said. “Our financials show that the benefits of our move to the cloud are just beginning.”

Adobe’s digital marketing business, which makes software that analyses customer interactions and manages social media content, grew by just 2.3% in comparison, to $382.7 million.

The company’s shares jumped 4.7% to $93.10 following the release of its latest trading figures.

Dell, EMC, Financial Results, M&A, News & Analysis, Virtustream, VMware

Shareholders question value in Dell/EMC deal

Dell office logoThe prospect of a potential shareholder revolt has changed the terms of the EMC takeover by Dell.

Under a new proposal EMC will retain a majority stake in Virtustream and has dropped plans to integrated it with VMware, according to sources quoted in Reuters.

Shares in VMware have lost a quarter of their value since Dell’s $60 billion deal to buy EMC was reported in BCN in October. The fall in share value could jeopardise the takeover deal, given the complicated stock related funding of the $67 billion transaction. Dell was originally set to pay EMC shareholders $24.05 per share in cash along with a special stock that tracks the common shares of EMC’s owned virtualisation company VMware.

Under the terms of the Dell deal, EMC shareholders will receive a 0.111 share of VMware tracking stock for each EMC share. However, with VMware shares falling, the value of one of EMC’s most precious assets is a major concern to stakeholders on both sides of the takeover.

A new plan has been hatched, reports Reuters, with EMC set to assume Virtustream’s losses by keeping a majority stake, while VMware will have a minority stake, in order to distance itself from the effects of the loss maker.

News of the new deal made VMware’s common shares improve in value by 3.85% at close of play on the New York Stock Exchange yesterday. Their current price stands at $60.35 a share. Uncertainty about the future of VMware has affected its ability to close deals, according to reports, while a disappointing earnings forecast for fourth-quarter revenue was blamed on currency fluctuations across China, Russia and Brazil.

Investors are asking EMC to launch a share buyback programme for VMware, according Reuters, but no decisions have been made. Activist hedge fund Elliott Management, one of the architects of strategy change at virtualisation company Citrix, is a top EMC shareholder.

Buying back shares could prove expensive, reported Recode. Since $5.7 billion of VMware’s $7.2 billion in cash and short-term investments is held outside the U.S. and subject to corporate taxes if the money is repatriated. Some shareholders pushing for the buyback have suggested taking on debt to pay for it.

EMC bought Virtustream for $1.2 billion in July and its ownership is shared between parent EMC and VMware on a 50/50 basis. Ending the joint venture arrangement could relieve pressure on VMware and cut the amount of capital spending and additional investment Virtustream would need, according to Bernstein analyst Toni Sacconaghi, in a research note seen by Reuters.

Big Data, Financial Results, News & Analysis, Splunk

Splunk CEO quits while ahead after 2% revenue growth

splunkAs big data pioneer Splunk reported better than expected quarterly revenues and shares surged by 2%, its leader for the last seven years has announced his retirement.

Splunk CEO Godfrey Sullivan, who successfully steered the software company through an initial public offering in 2012, has stepped down to be replaced by Doug Merritt, a senior VP. However, Sullivan will remain at the company as non-executive chairman and has promised a smooth transition.

Sullivan, previously the boss of Hyperion until it was acquired by Oracle, has steered the company since the days when the value of machine-to-machine (M2M) intelligence and big data analytics were relatively unknown. The Splunk IPO in 2012 was a landmark for the industry, being the first time the public were invited to invest in a company specialising in the then-new concept of big data. Splunk’s IPO was acclaimed as one of most successful tech offerings in the decade with share prices surging 108% on the first day of trading.

Under Sullivan Splunk’s customer base grew from 750 to 10,000 and annual revenues from $18 million to $600 million, according to a Splunk statement. His successor, Merritt, a veteran of SAP, Peoplesoft and Cisco, has been with Splunk since 2011 and said he would work with Godfrey on a smooth transition. “We will continue our laser focus on becoming the data fabric for businesses, government agencies, universities and organisations,” he said.

“Doug brings enormous management, sales, product and marketing skills to his new role,” said Splunk’s lead independent director John Connors. “As senior vice president for field operations for Splunk, Doug has consistently delivered outstanding financial results.”

In its results for the third quarter of financial year 2016 Splunk reported total revenues of $174.4 million, up 50% year-over-year, and ahead of analyst expectations by $14.4million.