Category Archives: 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.”

IBM cloud service revenue up despite 14th quarterly revenue decline

IBM2IBM has posted an unexpectedly large drop in revenue and cut its full-year profit forecast, blaming the strong US dollar for dampening demand from China and emerging markets. Though cloud, big data, mobile and other strategic markets are growing, their rise is not enough to arrest a long term trend of decline.

IBM, which gets more than half its business from overseas, says it has been affected as the dollar is currently 17% up on its standing against a basket of currencies compared to this time last year.

Chinese sales were particularly affected, with fewer big deals being registered. As a consequence revenue from China fell 17%, IBM’s chief financial officer Martin Schroeter told analysts. Sales in Brazil, Russia, India and China combined were down 30%.

The company’s total revenue fell 13.9% to $19.28 billion in the quarter, below analysts’ average forecast of $19.62 billion.

It was the 14th quarter in a row that IBM has posted a reduction in revenue. As IBM divests itself of low-margin businesses it has failed to make up the shortfall, yet, through cloud computing, according to analysts.

“This is another example of the massive headwinds that traditional tech stalwarts are seeing in this ever-changing environment, as more customers move to the cloud,” said FBR Capital Markets analyst Daniel Ives.

According to IBM CFO Martin Schroeter, weakness in IBM’s consulting and storage businesses account for the revenue shortfall, rather than the performance of its cloud services.

“I would characterize it as the consulting and systems integration business moving away from these large, packaged applications and the storage business moving to flash and to the cloud,” Schroeter told Reuters in an interview.

Revenue from IBM’s ‘strategic imperatives’, cloud and mobile computing, data analytics, social and security software, rose 17 per cent in the third quarter ending on Sept 30th.

IBM’s net income from continuing operations fell to $2.96 billion, or $3.02 per share, from $3.46 billion, or $3.46 per share, a year earlier.

At the close of trading yesterday (Monday) IBM’s shares had fallen 7 per cent this year.

Software and platforms as a service driving our growth says Oracle

OracleOracle’s latest quarterly results show the increasing strategic of importance of revenue from cloud software and platforms as a service, according to the vendor. Chairman Larry Ellison also claimed the sales figures show Oracle will soon overtake Salesforce as the top selling cloud operator.

The official figures for Oracle’s fiscal 2016 Q1 period show that total revenues were $8.4 billion, which represent a two per cent fall in US dollars but a seven per cent rise in constant currency. Oracle attributed the fall to the current strength of the US dollar.

However, a clearer pattern emerged in the nature of software sales, when benchmarking all sales in US dollars. While revenues for on premise software were down two per cent (in US dollars) at $6.5 billion, the total cloud revenues were up by 29 per cent at $611 million. The revenue from Cloud software as a service (SaaS) and platform as a service (PaaS) was $451 million, which represents a 34 per cent increase in sales. Cloud infrastructure as a service (IaaS) revenues, at $160 million, rose 16 per cent in the same period.

Meanwhile, Oracle’s total hardware revenue figure for the period, $1.1 billion, also indicated a decline, of three per cent. Using the same US dollar benchmark, Oracle’s services revenues for the period more or less stagnated, at $862 million, a rise of one per cent.

Growth is being driven by SaaS and PaaS, according to Oracle CEO Safra Catz. “Cloud subscription contracts almost tripled in the quarter,” said Catz, “as our cloud business scales-up, we plan to double our SaaS and PaaS cloud margins over the next two years. Rapidly growing cloud revenue combined with a doubling of cloud margins will have a huge impact on growth going forward.”

Oracle’s cloud revenue growth rate is being driven by a year-over-year bookings rise of over 150 per cent in Q1, reported Oracle’s other joint CEO Mark Hurd. “Our increasing revenue growth rate is in sharp contrast to our primary cloud competitor’s revenue growth rates, which are on their way down.”

Oracle is still on target to book up to $2.0 billion of new SaaS and PaaS business this fiscal year, claimed executive chairman Larry Ellison. “That means Oracle would sell between 50 per cent more and double the amount of new cloud business that Salesforce plans to sell in their current fiscal year. Oracle is the world’s second largest SaaS and PaaS company, but we are rapidly closing in on number one.”

Oracle Q4 cloud revenues grow 29%, down 5% overall

Larry Ellison said the company's cloud revenue will eclipse Salesforce's revenue this year

Larry Ellison said the company’s cloud revenue will eclipse Salesforce’s revenue this year

Oracle Corporation has announced its 2015 fiscal Q4 quarterly earnings, unveiling impressive growth for its PaaS and SaaS business, which is up 29% on last year. The company posted overall revenue of $10.7 billion however, down 5% year on year.

After a bullish announcement of its Q3 results in March, where Oracle boss Larry Ellison publicly called out rival Salesforce, the software giant posted Software and Cloud business revenues at $8.4bn, down 6% year on year, while its SaaS and PaaS revenues came in at $416m.

Announcing the decline in revenues, Oracle was hasty to point the finger at the fluctuating strength of the US dollar against international exchange rates; it claimed total revenues would have been up 3%, software and cloud revenues up 2% and SaaS and PaaS growth 35% instead of 29% year on year, blaming the strengthening of the U.S. dollar.

Oracle CEO Safra Catz is expecting the growth of its SaaS and PaaS revenues to kick up a notch in fiscal year 2016.

“We sold an astonishing $426 million of new SaaS and PaaS annually recurring cloud subscription revenue in Q4,” he said. “We expect our rapidly increasing cloud sales to quickly translate into significantly more revenue and profits for Oracle Corporation.” For example, SaaS and PaaS revenues grew at a 34% constant currency rate in our just completed Q4, but we expect that revenue growth rate to jump to around 60% in constant currency this new fiscal year.”

In highlighting his firm’s ambition for the coming fiscal year, Ellison again took the chance to name-check one of Oracle’s main competitors.

“We expect to book between $1.5 and $2.0 billion of new SaaS and PaaS business this fiscal year,” he said. “That means Oracle would sell more new SaaS and PaaS business than plans to sell in their current fiscal year – the only remaining question is how much more. Oracle’s planned SaaS and PaaS revenue growth is around 60% in constant currency; has a planned growth rate of around 20%. When you contrast those growth rates it becomes clear that Oracle is on its way to becoming the world’s largest enterprise cloud company.”