Oracle Has Its Head in the Cloud But Can't See the Horizon

(Bloomberg) -- Oracle Corp. shares tumbled the most in more than six years after the company forecast slower sales growth for its cloud revenue, sparking investor fears that it was falling behind rivals competing in the burgeoning sector.

Oracle’s cloud revenue rose 32 percent in its most recent quarter, far below its average growth of 52 percent the past eight quarters. By comparison, peers such as Alibaba Group Holding Ltd., Amazon.com Inc., Microsoft Corp. and Salesforce.com Inc. all posted cloud revenue growth figures in their most-recent quarter largely in line with their eight-quarter trends.

Looking forward, the picture for Oracle is even worse, as it projects it fiscal fourth-quarter cloud revenue to rise only 19 percent to 23 percent, at most about 44 percent of its eight-quarter average.

Oracle’s database business has matured, so investors are looking for growth in newer segments, such as cloud-based products. JMP Securities’ analyst Pat Walravens said the company was late to transition to the cloud.

Amazon has been able to dominate the segment, cutting prices on its Internet of Things web service as it expanded its use of the cloud to allow for expansion into consumer electronic devices, such as its Echo voice-activated speakers and FireTV products, as well as driving partnerships with other firms like MLB Advanced Media to power its player-tracking system.

In the fastest-growing slice of the public cloud, Amazon and Microsoft took the top two spots in Gartner’s 2016 ranking of worldwide infrastructure as a service; the former garnered 44 percent of market share and the latter 7.1 percent. Alibaba came in third at 3 percent. Amazon’s share exceeded that of all other companies outside of the top 5 combined, which includes Oracle.

-With assistance from Gilbert Xu, David Russell, Karishma Motwani (Bloomberg Global Data)

To contact the reporter on this story: Adam O. Manzor in New York at amanzor@bloomberg.net.

To contact the editors responsible for this story: Chakradhar Adusumilli at cadusumilli@bloomberg.net, Molly Schuetz, Andrew Pollack

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