Oracle’s Latest Earnings Report
Early last week, Oracle released their Q2 2019 earnings results which were decent but nothing to write home about. The biggest achievement for the company in cloud was that gross margins were stable at 86% while still investing to build out second-generation Oracle Cloud Infrastructure, or OCI. That 86% accounts for overall cloud services and support; they do not provide a breakdown. The company’s Saas business grew in the ballpark of 20%. Oracle is neither the fastest nor the largest cloud provider, but most companies would not consider exiting or deemphasizing a growing business with 86% gross margin
During the earnings call, Larry Ellison, Co-Founder and Chief Technology Officer of Oracle said that with the company’s latest Autonomous Database and OCI gen-two, “we expect not only to hold on to our 50% database market share, we expect to increase it.” Ellison went on to say “Oracle Database will drive Oracle’s IaaS business. It will be around 50% of that business; and maybe more.”
AWS Signs Up to Defend JEDI Contract
An unsurprising move, AWS has signed up to defend the JEDI cloud contract alongside the U.S. government. It has only been a little more than a week since Oracle filed their lawsuit against the U.S. government and its contract, citing that the JEDI RFP process unfairly favored Amazon in its single-vendor decision, which won’t be reached until April of next year. Oracle says the decision violates federal procurement rules and that two members of the JEDI team had a conflict of interest due to previous business affiliations with AWS.
Amazon filed paperwork to join the case stating that because of claims being made by Oracle, it had a direct stake in the outcome. Amazon’s attorneys stated in a motion to intervene, “Oracle’s complaint specifically alleges conflicts of interest involving AWS, Thus, AWS has direct and substantial economic interests at stake in the case, and its disposition clearly could impair those interests.” The motion was approved by the United States Court of Federal Claims the same day.
The US Government Accountability Office had already dismissed previous challenges from both Oracle and IBM. Google pulled out of JEDI back in October due to employee action, spurring Google to outline its AI principles. Microsoft opted to stay in the JEDI bidding process despite similar pressure from its employees.
Oracle has clearly positioned themselves as ready to play ball in court, but so has AWS. This high profile cloud contract has been gathering national attention for quite some time now and is heavily sought after by many major cloud providers due to the amount of money at stake for the winner. Expect more on this as Oracle’s case proceeds.
Alibaba Opens Chipmaking Arm Subsidiary
Alibaba has registered a Shanghai subsidiary of its recently announced chipmaking arm, Pingtouge , in the midst of many Chinese companies heeding the government’s call to develop homegrown core technologies. According to public records, the Shanghai-based company was formed last month in the Shanghai Free Trade Zone with a registered capital of $1.5 million.
Records show that the company is entirely owned by Alibaba’s Damo Academy, the company’s research and development unit that was launched in 2017 for developing leading technologies, including AI and quantum computing over the course of three years.
Liftr Insights’ Principle Analyst, Paul Teich, has been predicting moves like this one by Alibaba for a while now. In an article on Next Platform on August 8, 2018, he predicts how designing custom chips in-house is becoming the new normal for cloud giants such as Amazon, Alibaba, Baidu, Facebook, and Google. It will be interesting to see which companies follow suit next.
Dell Re-Lists To Stock Market and Red Hat to Vote on IBM Aquisition
Dell will complete its buyback of VMware shares on December 28th at which time VMware’s stock ticker will convert to read “DELL”. Paul Teich, in his Forbes article last week writes about how the early 2018 rumor of a Dell-VMware reverse merger kicked off an increase in investment in private cloud infrastructure across the datacenter industry. He believes VMware’s hypervisor-based business model is now under assault by the cloud industry and container technology.
Red Hat has officially placed a date on the books, January 16, 2019, for its shareholders to vote on a proposal to adopt the previously announced Agreement and Plan of Merger with IBM. The Board of directors of Red Hat strongly recommends the stockholders voting in favor. In his same Forbes article, Teich also talks about this acquisition bid and how it impacts other Linux and container distributions such as SUSE.
Upcoming in the Cloud
There are a couple of key things Liftr Insights expects to happen as the year ends and the new year begins. We expect things in the cloud economy to continue to be very stable aside possibly from Boxing Day, where high volumes of online retail transactions may cause outages.
The third week of January is when we will expect the next earnings calls to be reported; beginning with IBM, who typically lead the pack, followed by Google’s parent company Alphabet and Amazon for AWS. January is a quiet month for cloud events, but an exciting month for Liftr Cloud Insights. Our analysts will be finalizing the first full year of data.
The Liftr team will be enjoying our holiday next week, so our next installment will be available on Monday, January 7th. Have a relaxing and safe holiday season, and we’ll see you back in the new year!
