Oracle Corporation: The Gloves Are Still Off Against Workday

Oracle Corporation: The Gloves Are Still Off Against Workday
By Sanatan2014 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Oracle’s HCM World conference kicks off tonight in Chicago, and then the company is scheduled to hold an investor meeting tomorrow about its HCM business. Cloud has been the major focus for the company as it has become one of the biggest players in the segment, so when management talks cloud, investors listen carefully.

Oracle’s cloud transition continues

Ahead of those two events, Drexel Hamilton analyst Brian White reiterated his Buy rating and $51 per share price target on Oracle stock. He’s expecting “positive cloud vibes” from management tonight when they take the stage for HCM World. He thinks the worst of the company’s transition to the cloud is now in the past and that the trough in its operating profit cycle is also now past. He describes Oracle as having “the characteristics of a more defensive tech stock with the benefits of a rapidly growing cloud portfolio.”

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CEO Mark Hurd is set to kick off the company’s keynote tomorrow morning, but tonight investors and conference attendees will hear from speakers from The Wharton School, KPMG, and Baylor Scott & White Health.

Oracle goes head to head with Workday

White notes that the cloud giant racked up $585 million in cloud revenue in the third quarter of fiscal 2016 and added 942 system-as-a-service customers to surpass 11,000. He also points out that the company has repeatedly and directly targeted competitor Workday. For example, management said in the third quarter that Oracle’s Fusion HCM and ERP together had more “go-lives” over the last six quarters than Workday has had in its entire lifetime. They also mentioned the word “slaughter” in speaking about the competition over ERP customers between them.

This week White expects to hear more such commentary from Oracle management, particularly in connection with HCM and ERP. He does think Workday is still a fierce competitor in the U.S. but not so much outside the country. However, he also said that the two companies together are at the forefront of the HCM SaaS market, which Workday estimates as being worth about $12 billion.

Indeed, Workday and Oracle frequently are at each other’s throats, but the Drexel Hamilton analyst sees Oracle as being “clearly ahead” in ERP, although he adds that Workday is “showing strong growth” in areas like Financial Management, although it is growing off a small base.

Oracle stock edged lower by as much as 0.88% to $$40.71 per share, while Workday slipped lower by 0.73% to $78.34 per share.

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