Oracle Cloud subscription revenue increases 25% and hardware rebounds, but Microsoft, SAP, Salesforce.com, and Workday threats loom large.

Oracle put the correct face on third-quarter gains in cloud computing and hardware sales reported late Tuesday, however the increases weren’t quite enough to maintain pace with fast-growing competitors or Wall Street expectations.

Oracle reported total revenues of $9.31 billion for the third quarter ended February 28, up 4% from the prior-year quarter. Profits totaled 68 cents per share. The entire performance was nearly according to the $9.36 billion in revenues and 70 cents-per-share expected by financial analysts, but shares fell in after-hours trading.

The most positive news at the quarter was a 25% increase in cloud software subscription revenues and an 8% increase in hardware revenues. It was the primary growth seen in Oracle’s hardware business because it acquired Sun Microsystems nearly four years ago. Oracle executives tied the cloud gains partially to “tripple-digit” Oracle Fusion Cloud growth while the hardware rebound was attributed to a 30% gain in engineered systems sales.

[Want more at the biggest threat to Oracle Database? Read Microsoft Releases In-Memory Ready SQL Server 2014.]

“Our engineered systems business is growing rapidly for a similar reason that our cloud applications business is growing rapidly,” said CEO Larry Ellison. “In both cases, customers want us to integrate the hardware and software and cause them to interact so that they shouldn’t have to.”

These successes failed to convince financial analysts that Oracle is doing well enough in either the cloud or on-premises categories. “In database we predict Microsoft is picking up share, and at the applications side, SAP remains a tricky competitor and folks are moving to cloud-based competitors,” financial analysts Brent Thill of UBS AG told Bloomberg BusinessWeek.

Oracle’s chief database competitor is Microsoft SQL Server — and Microsoft’s 2014 release, due out on April 1, will feature in-memory processing capabilities. Ellison noted during his earnings call that Oracle’s previously announced in-memory option for Oracle Database 12c can be available once this summer.

“We expect [in-memory] goes to accelerate adoption of 12c a great deal [because] the performance gains are so dramatic,” Ellison said. “There are hundreds of folk trying it out now before it’s even released, and it’s a distinct feature on the subject of having the ability to have a large payoff rapidly.”

Oracle president Mark Hurd reported that the corporate booked greater than 65 seven- and 8-figure cloud deals, and he claimed faster bookings growth than Salesforce.com and more cloud customer wins than Workday. But these claims seemed at odds with raw revenue growth figures. Against Oracle’s reported 25% gain in cloud subscription revenues, Salesforce.com reported 37% growth in its last quarter while Workday logged a 74% gain.

Describing Oracle’s platform-as-a-service progress, Ellison vowed that the company’s database and Java services, currently available on a limited basis, could be delivered at scale this summer. He also predicted they will give the corporate advantages over rivals comparable to Amazon Web Services that lead with commodity compute and storage offerings.

“Customers like to move their existing applications out in their own data centers into our cloud, and [with our database and middleware services] they are able to do this with no need to modify their applications in any respect,” Ellison said.

Oracle’s best hope is that consumers do want to move their traditional software stacks into the cloud. If a customer’s choice is new SaaS applications, Oracle faces more formidable and plentiful competition.

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Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of … View Full Bio

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