Oracle (NYSE:ORCL) hasn’t been the best loved or best performing software investment for many years. The company’s transition to the cloud has been long, arduous, and probably has not achieved the results for which investors were hoping when it got started. Over the past decade - that’s right, decade- Oracle revenue has risen by just 7% and most of that came from the growth of the last three reported quarters. Operating cash flow was $13.7 billion 10 years ago, and contracted to less than $10 billion in the latest fiscal year (That contraction was basically a function of acquisition expenses, mainly related to the purchase of Cerner which closed just beyond the end of the fiscal year. Excluding the cash expenses of the transaction that Oracle incurred, Oracle’s cash generation actually grew slightly last year). Overall, non-GAAP operating income of $19.6 billion last year was marginally higher than the prior year, and was up by 44% over the past decade. Oracle shares have more than doubled in the past decade, although they have fallen by 35% since their high point in December of 2021.
Oracle has been about to turn the corner for years, but for every corner turned, there have been pitfalls and detours that have prevented the journey to any kind of sun-filled upland. Simply put, many of its plans and strategies have simply not come to fruition… until now. Most readers are well aware of what has happened to the valuation of high growth IT shares-and even IT companies with far more modest growth and valuation. There are some, and I acknowledge I am in this camp, who believe that the valuation carnage has created an existential opportunity. Oracle, even after what I believe to be a highly visible inflection point, doesn’t have the multi-hundred percent appreciation potential of the road kill in the IT space. On the other hand, Oracle’s constant currency, organic revenue growth reached 10% last quarter, compared to 7% the prior quarter, and just 4% growth at the start of the fiscal year. The prior fiscal year had experienced constant currency growth of 2%, so the growth acceleration is quite substantial for a mature company such as this.
What Oracle does have is a reasonable dividend yield (about 1.9%), a very substantial free cash flow margin, and now the reasonable potential of sustained double digit growth. Not 30% growth or 20% growth, but growth in the double digit range, in combination with very high and probably slightly growing operating margins. And the shares really haven’t reacted significantly to the growth accelerating the company has just announced. Overall, Oracle shares have fallen about 35% since the high they reached after the company’s Q2 earnings release last December. The shares had reached a low of $64 just prior to the earnings release, and while they rose 10% on the day after the earnings, release, they have backed down again, and stood just 6% above their low for the year at the market close on 6/23.
Oracle shares aren’t the kind of investment I typically recommend. For many years now, I have always looked for growth and share gains and a winning strategy. Oracle has been defending its turf, and it has certainly not been a share gainer. Some of its strategies have taken a very long time to reach fruition; some have simply not paid off in terms of achieving durable double digit growth. Investing in IT is a perilous undertaking, at best, and after having invested in and commented on IT companies for literally decades, I am more disposed to look for growth even when I have to pay what might seem as an elevated valuation to do so. But while I might be slightly, although by no means wholly, inured to the volatility and the potential drawdowns seen these last 8 months, this period in the market has been as difficult as any similar period I have ever experienced. While the circumstances of this crash are quite different than the last two or three through which I have lived, the results are reasonably similar. And so I have come to reconsider Oracle as an investment.
Oracle shares are highly unlikely to have the greatest potential percentage appreciation in the IT space. On the other hand, I think the combination of rising growth, and conspicuously elevated operating margins have left the shares undervalued, even on a relative basis, and that many readers will find the combination of reasonable growth, and great profitability and visibility to be attractive in this perilous market for high growth IT names. Oracle, for the most part, has ceased to be a share donor (it is still, and will likely continue to lose share overall in the database space), and while it is never going to have the market dominance it once enjoyed in the relational database world, it is not going to be excluded from some of the opportunities, both in the cloud infrastructure and cloud application space. And that is good enough, I believe to make recommending the shares a reasonable judgement despite the company’s checkered history of over-promising and under-delivering.
Oracle reported the results of its fiscal Q4 on June 13th. Revenues rose by 5% as reported, 10% on a constant currency basis. Its cloud revenues rose by 19%. Non-GAAP operating income rose 3% as reported and 7% in constant currency. While these numbers may not seem all that exciting, in fact, the constant currency organic growth of 10%, was a couple of percent above the previous forecast, and the highest rate of constant currency organic growth the company has reported since 2011.
The company’s EPS for the quarter of $1.54 was $.20 above guidance. Part of this beat was because Oracle’s income tax expense this past quarter was only 10%; the EPS guide had assumed a non GAAP tax rate of 19%. That tax rate difference accounted for about half of the headline earnings upside. The company’s non-GAAP operating margin for the quarter was 47% a bit lower than that reported for the prior year, but certainly at a high level. The decline in year on year operating margins was essentially a function of a 16% year on year, constant currency increase in research and development expense. It has been many years since Oracle has ramped research and development spending at that kind of rate and as will be detailed later in this article some of its innovation is starting to bear fruit. For better or worse, the senior management of Oracle has made a rather significant bet on its strategy that can have long-term positive business consequences.
Oracle had a much stronger data base quarter than has been the case for years now. Of course Oracle competes with MongoDB (MDB) these days as well as a host of what might be described as ankle-biters, and Mongo as well as the ankle biters win a substantial number of competitive engagements-in particular, Mongo’s Atlas offering provides both developers and users with superior noSQL functionality. And, equally, the large cloud companies all offer their own data base products, which have drained market share from Oracle for the last several years. Further, a company such as Snowflake (SNOW) while not often considered a direct Oracle competitor, is certainly a beneficiary of some of the stronger trends in cloud data warehousing. But this quarter, although not specifically reported, Salesforce (CRM), an Oracle data base customer for many years, apparently renewed/expanded its usage of Oracle’s database. So, too, did other significant enterprise software companies who use Oracle as their database platform. Quite surprisingly, therefore, total license revenues rose by 25% year on year.
Of course these kinds of transactions and that kind of growth are not to be expected every quarter, but the rumors that Salesforce was going to leave the Oracle platform have not turned out to be accurate and the company’s database market share within the application cloud vendors has remained far stronger than many observers have felt would be likely. While the company’s data base revenue have remained stronger than expected, its infrastructure software revenue rose, and in particular, what Oracle calls infrastructure cloud services grew 49% and the autonomous data base, showing a bit of life, saw a 29% increase in revenues.
Oracle is obviously not in the same league as the “cloud titans” which consist of AWS (AMZN), GCP (GOOG) and Microsoft’s (MSFT) Azure when it comes to providing public cloud infrastructure. Most of its cloud infrastructure customers are users of the company’s portfolio of apps. I don’t anticipate that Oracle will ever achieve the kind of revenues from its infrastructure offerings as the cloud titans are enjoying, but I expect that the company’s IaaS offering will be one factor in keeping Oracle’s revenue growth in double digits. In this last quarter, Oracle’s cloud consumption revenues grew by 83% year on year.
Oracle also enjoyed a particularly strong quarter in terms of its Apps bookings. Specifically, the company’s cloud application software revenues (Fusion ERP) rose by 24%. In particularly, NetSuite ERP revenues grew by 30%, which has to be considered a significant surprise. The company’s traditional apps business continues to decline; that said, the cloud component of the apps business has now crossed 50% of the revenues from that segment which should enable the Oracle to continue to achieve double digit growth for its ERP offerings for some years to come.
I like to look at RPO balances as providing the best insight in terms of the growth of a company’s sales. The Oracle’s RPO balance grew 17% year on year, after absorbing some impact from FX. This is indicative of a very strong bookings quarter, which does include the tailwind from what was apparently the significant booking made by Salesforce.
These days, the top issue on the minds of investors relates to how a particular company might fare in what many assume is an impending recession. It is hard to look at any kind of business streaming news service without seeing another prognostication of the probability of a recession. Given all the technology and all the individuals involved in making such forecasts, anything I might write on the subject would be superfluous and just opinion, not substantiated by quantitative models.
The consensus forecasts from the economics community seems to be that Fed tightening has about a 50% chance of tipping the economy into a recession. The further consensus seems to be that a recession will be of brief duration and mild.
How does Oracle stack up in that environment? The specifics of management guidance, after adjusting for the impact of the just completed Cerner merger seem to imply that its adjusted percentage growth rate might slacken in this current quarter, although it is difficult to triangulate the exact forecast because of not knowing how much conservatism has been baked into the contribution from Cerner. The CEO, on the call, however, talked about accelerating adjusted organic growth, and the facts as presented seem to substantiate that kind of forecast-specifically the strong growth in the company's RPO balance.
Specifically, the company forecast that the organic growth of its cloud business will accelerate from 22% in the year just reported, to more than 30% in the current year. The company’s cloud revenues were about $2.5 billion last quarter, and are now 21% of total revenues. So, the organic, currency adjusted revenues growth from the cloud will produce 700-800 basis points of growth at the company’s forecast levels in the current fiscal year.
The company hasn’t explicitly provided a forecast for the full year of fiscal ’23; its forecast for Q1 is for reported revenues to reach about $11.5 billion. Cerner’s revenue run-rate had been a little bit greater than $1.4 billion/quarter. So, the organic growth rate that Oracle is forecasting is about 4%, net of a 400 basis point FX head wind, and about a 100 basis point headwind for the end of the company’s operations in Russia. The estimate is probably conservative, as the company CEO said that she had added conservatism to the Cerner revenue outlook because of acquisition related friction.
The analyst consensus is basically congruent with guidance. The 1st Call revenue consensus for the year is published at $48 billion+ but that includes a couple of analysts who have not updated their forecasts and thus haven't included the contribution from Cerner. The “real” consensus is probably about $49 billion+ which implies organic growth adjusted for currency impacts, and the end of the company’s business in Russia of about 8%. That is almost certainly a hyper-conservative set of expectations. Based on the company’s business momentum, and the investments the company is making in its business, I would be surprised to see adjusted organic growth of less than 10% next year, and some further acceleration beyond as some of the revenue synergies that are likely to be achieved through the merger with Cerner are realized.
The further questions that I think need discussion is how will this be possible in a recessionary climate and with the plethora of competitors the company faces. Reaccelerating to 10%+ organic growth after years of not having much growth at all is a considerable inflection, especially given the size of this company, its market share, and the competitive environment in the enterprise software space.
Oracle runs much shorter conference calls than most other software companies. That has been the case for many years, and remains so. And thus, company commentary addressing the issues above is a bit sparse:
So my question is, Safra, Larry, can you supply us more color on what's driving that reacceleration in license revenue in particular? Even as cloud revenue inflected to its highest growth rate in more than 4 years, is this BYOL bringing the heat? Is this autonomous database getting big enough and growing fast enough to lift the overall number, et cetera. And is this the broad-based demand that you mentioned on the Q3 call? Or is this more big deal driven?
So it's a little of both. You see, first of all, large enterprises understand that having an unlimited agreement for some period of time, an unlimited agreement gives them unbelievable flexibility. Any large customer, large database user that does not have an unlimited agreement with us is really not optimizing for their spend because it gives them incredible flexibility.
They can use on-premise for as long as they need it. They can move to the cloud and get a much lower price in the cloud with BYOL, and they can move back and forth. And it just gives us the kind of flexibility. Those agreements are the ultimate sort of the foundation of so much of what goes on.
In addition, of course, in technology, we also have our leading Java business, which on-premise is an extensive use and in the cloud is at no charge. So customers can be motivated to bring their Java to the Oracle Cloud and to use it at no charge, their Java program and to use it at no charge.
So we have a lot of things that incent bringing your Oracle databases to our cloud and, of course, all your Java work to our cloud. So both of those are absolutely critical for our license numbers to be as strong as they are. And the Oracle database, I've been following Oracle for, well, since the '80s. And I always -- we always hear about some new product that's about to overtake Oracle. And the reality is that the Oracle database is beyond the gold standard.
If you really need work done and if you want to protect your most critical data and you want to use large amounts of it, it is going to be the Oracle database that is head and shoulders above every other product. And invariably, some folks try other things when they get bigger, they always come back to the Oracle database It is irreplaceable because of its technical capabilities that are so far superior. And that becomes very, very, very clear to customers and more and more of them license -- continue their license and extend those unlimited agreements, whether for on-premise and in the cloud. It's not either or it's both, and that is the best use of it.
I'll add 1 thing to that, which is the Oracle Autonomous Database is interesting because it's autonomous. In other words, it doesn't require human beings to run it like database administrators, things like that. Recently, inside of Oracle, inside of our cloud, virtually every database going up for -- to run our cloud, the autonomous database because people don't want to hire database administrators inside of Oracle Corporation. It's just much cheaper to run.
And I think in that sense, the Autonomous database is countercyclical. You do save a huge amount of money just by moving from conventional Oracle database to the autonomous database. It's actually more secure, more reliable and cost Wales to run. You don't need a bunch of experts running it. You don't need anyone to run it.
There is a programming language called APEX, which uses -- it's a low code programming environment where you use 10% the name amount of programmers that you would use if you were programming in our other programming language called Java. And APEX is also becoming very popular inside of Oracle to build applications. I see this as 2 interesting trends as people using more modern technology to dramatically reduce their labor costs, which I think will play very well in the next couple of years in this economy.
Yes. I think people don't realize how exorbitantly expensive it is to run those large SAP systems. They have data centers associated with them. They have hundreds, sometimes thousands of technicians to run them. They're old, they're clunky and moving to Fusion ERP. It's just a totally different world and costs So - the costs are tiny in comparison. I think people sort of forget that. And this applies really to all on-premise systems, but even more so to those old SAP systems.
And our cloud offering in that area really is unrivaled. Frankly, unrivaled. And we -- our win rates just continue. And we're very optimistic about it, and we've sold a lot. A lot is still being implemented, and we expect that you'll see that in the numbers, while our customers end up spending less than what they use to spend with on-premise.
Oracle has been run by the same team for many years now, with the exception of the passing of former co-CEO Mark Hurd. And the team has certainly had its shares of miscues and wrong choices. The team is also very promotional. That doesn’t mean that everything management says is inaccurate or should be disregarded.
For example, I believe that MongoDB has an excellent and widely respected database solution. And it is really difficult to gainsay the market penetration in the database area achieved by the cloud titans as well as the extraordinary growth of Snowflake. What I believe is happening is that Oracle is starting to realize some of the benefits of its extensive product line. Oracle is a bit unique in having both a competitive, enterprise grade set of ERP solutions and a full featured database. It is not necessary to believe all of the competitive propaganda above in order to believe that Oracle has created a set of offerings that provide users with benefits in terms of flexibility and costs that have reaccelerated growth. That said, I do believe that the benefits of the autonomous database are not all hype, and anecdotal checks I have made suggest it is finally starting to achieve traction with some users.
When it comes to ERP, I confess that the conflicting claims amongst the major competitors, and some of the point players as well, are simply impossible to resolve. Oracle Fusion and SAP S/4 Hana have been mortal rivals in terms of their apps offering for decades now. Oracle and Workday have battled as well. Microsoft Dynamics 365 is another successful competitor in the space that has enjoyed market share gains and excellent growth. The link shown here is quite positive for Oracle’s competitive positioning. Interestingly, the chief competitor listed by this evaluation is NetSuite, which is Oracle’ small/medium business ERP offering. Here is a link to an evaluation which compares the differences between the flagship ERP products offered by SAP and by Oracle. SAP is far larger than Oracle in terms of its revenue from apps, and this is one area in which Oracle can and is apparently achieving market share gains. This evaluator, who is a 3rd party consultant with Oracle experience, maintains that Oracle is his choice between the two leading vendors in the space.
Oracle, which is the largest enterprise focused software company, seems likely to experience at least some cyclical perturbations. But in a mild and brief interruption of overall economic growth, its improving competitive position is likely to buffer the impact. It isn’t necessary to totally believe the comments by Larry Ellison and Safra Katz regarding all of the counter-cyclical demand drivers in order to believe that Oracle’s business will really be able to achieve double digit growth over the next year and beyond.
Cerner is by far Oracle’s largest single acquisition, and it will represent more than 10% of the revenues of the combined entity. In the past, Oracle was an acquisitive organization, but subsequent to the 2016 acquisition of NetSuite, this is the first significant acquisition made by the company. When the Cerner acquisition was announced in December, a few days after the company had announced a strong quarter, Oracle shares fell by about 16% over a two week span, which was noticeably worse than the software ETF, the IGV, which only fell 3% over the same period. Many of the analysts who cover Oracle were skeptical that the acquisition would produce synergies. The company, in the press release announcing the merger said it would be accretive to non-GAAP earnings in the current fiscal year.
Oracle wound up paying $28 billion, or $95/share, for Cerner which was about a 40% premium above Cerner’s share price before the acquisition was announced. Cerner’s growth has been at a glacial pace over the past several years. Since 2018 revenue growth has been less than 10% in total; that is less than 3%/year. On the other hand, the company has been reasonably profitable, although adjusted operating margins in the mid-teens range are far below the levels at which Oracle operates.
This was an all-cash transaction and as Oracle had a cash balance of $22 billion before paying for Cerner, it had to borrow some money. The company already had $76 billion of debt and substantial lines of credit. The cost of debt for Oracle these days is about 3.2%; the weighted average cost of capital calculation is around 6.5%. So, for the transaction to make sense, Oracle has to assume some substantial synergies, both in terms of revenues and expenses, although the expectation of the acquisition adding to non-GAAP EPS in the current year seems a fairly safe projection.
Cerner is one of the leading competitors in the field of health information systems. I have linked here to an analysis of the company's solutions. The company has suffered through years of execution issues and management change. The company's principal competitor is privately held Epic Healthcare. Epic is slightly larger with a 31% share of the relevant market, compared to 25% for Cerner. The link here, delves into the differences and similarities between the two offerings. Most software companies grow by expanding their TAM into adjacencies. Cerner has not been successful with such a strategy which left it vulnerable to being acquired. I feel reasonably sure that Oracle will take the steps necessary to develop a vision and solutions to encompass more of the health care information systems market than Cerner had been able to accomplish.
Oracle and Cerner were not competitors before the merger. But there are enormous cross-sell/up sell opportunities. Health Care has been Oracle’s leading vertical for some time now. Just a few major installations that will be sales targets for the new entity include Indiana University Health, Northwell Health, CarolinaEast Medical Center and Atrium Health. Cerner is the 2nd largest health care software vendor. Some high profile customers include the NHS in the UK, Emory Healthcare and Johns Hopkins Children’s Hospital. Obviously the opportunities to sell Oracle data bases and its Fusion ERP to the Cerner installed base is huge. And the opportunity to leverage Oracle’s healthcare installed base to buy some of the large suite of Cerner apps is substantial as well. Quantifying just what these synergies will represent over time is not really something that I can realistically estimate; I imagine it will be a substantial number compared to Cerner’s current revenue run rate of $5.8 billion.
The cost synergies are easier to triangulate. Oracle’s non-GAAP margin last year was 46%, and the company has forecast that its operating margin would rise from that level. But at the least, it is 3000 basis points above Cerner’s most accurate operating margin. Adding 3000 basis points to Cerner’s operating margins and using its latest 12 months of revenue would yield $1.74 billion to Oracle’s operating profits, or about $.50 in incremental EPS after taxes. That is an uplift of 8% to the earnings anticipated in Oracle’s fiscal 2024, and since the company hasn’t explicitly guided to synergistic accretion, it is almost certainly not part of the currently published 1st Call consensus. At the least, assuming that the contribution margins from Cerner will be at rates comparable to Oracle's operating margins will justify the acquisition.
In the last conference call, the CEO talked about a strategy to review Cerner’s entire product portfolio, with a view toward replacing 3rd party products with comparable Oracle solutions. In addition, Cerner’s cloud product will move to OCI. I think the contribution margin from the merger, will, over a couple of years, serve as a decent tailwind to Oracle’s total operating margins, and will serve to fund the research and development effort needed to build the transformative health care solutions management environs.
As might be anticipated, Oracle, has a dramatic vision of how the product strategy incorporating Oracle is going to play out. The vision is pretty dramatic, but like many things with this kind of complexity and scope, execution is going to be key, and there will be elevated expenses and an extended payback. Rather than me interpreting the company’s healthcare software product roadmap, here are the deliverables the company is planning on releasing (from the Q4 conference call):
In health care, we’re in the process of building a complete suite of applications for the entire health care ecosystem, starting with health care providers like hospitals and clinics.
We’re modernizing Cerner’s clinical systems by adding capabilities like a voice user interface and applications like disease-specific AI models for cancer and other diseases. We’re including an IoT device network to Strengthen patient diagnostics and monitoring. We’re adding administrative systems, including managing the incredibly complex contract workforce that hospitals have as doctors are not bolt-on employees nor are nurses. We are going to help recruiting, scheduling and paying those contract workers according to their contracts.
Inventory at hospitals is enormously complicated. Inventories aren’t in a central location. You find inventory in nurse’s stations outside operating rooms, outside the intensive care unit. There’s inventory everywhere. Managing that inventory is very complicated. We’re adding RFID tags and maps on handheld phones to help people find what they’re looking for quickly. For payers, including insurance companies and governments, we’re automating payment authorization and billing systems. For pharmaceutical companies, we’re integrating our clinical trial system directly into the hospital clinical system, making clinical trials easier to start and faster to complete.
Of course not all of Oracle’s mergers have achieved their objectives. Oracle bought Sun Microsystems back in 2009. The company, somehow, may have gotten a return on the $7.4 billion purchase price, and some of what Sun brought to Oracle’s product offering such as Java has had some level of success. Oracle’s Exadata appliance, while still being sold and supported, certainly turned out to be far from the growth driver the company had expected. Health care software is certainly an opportunity, and Oracle starts with significant assets in its ambition to transform the space. But at the end of the day, given that the transaction is fully justified simply on cost synergies, and the share price certainly doesn’t in any way reflect the potential Oracle has to drive revenue growth through its transformation strategy, if the company is successful in its aspirations, it will be lagniappe for shareholders.
Oracle has used its free cash flow to significantly reduce outstanding shares which are now at 2.78 billion down from 3.02 billion a year ago and down from 4.2 billion just 5 years ago. Because of the consideration Oracle has paid to acquire Cerner, it has indicated that its accurate tempo of share repurchases which has been $600 million/ or about 9 million shares/quarter will continue until it has paid down much of the debt associated with the transaction. I suspect this absence of massive share repurchases has been one factor that has muted the share price performance of the shares in the days since earnings were released and the CEO described her plans for the future share repurchase cadence. For long term investors, this pause in high levels of share repurchase shouldn't greatly matter.
Oracle has been one of the most profitable software companies for the past decade and more. There are many reasons for the company’s profitability; one of these is that it still derives a significant level of very high margin service renewal revenues, particularly from its database customers who find the expenses associated with migrating to more modern technology simply not worth the problem. Of course, over time, these revenues will continue their decline, and they are being replaced by revenues from cloud solutions which have lower gross margins now, but which eventually will have a significant positive impact on Oracle's margins as the company scales its infrastructure and starts to benefit from very high margin renewals.
In considering Oracle’s model, it is important to note that its business has very seasonal characteristics. In particular, Q4, which is the quarter recently reported, is invariably the strongest quarter of the year with revenues typically growing 10%+ sequentially. Q1 is the company’s smallest quarter, and typically Q2 shows sequential progression from that low point. So, there is no reason to examine quarterly progression. Because Q4 is the seasonal high point for Oracle revenues, operating margins in Q4 have almost invariably been at the highest level in the year. The acquisition of Cerner is going to have a modest impact on dampening seasonality, as Cerner’s model has never been particularly seasonal.
Last quarter, Oracle’s non GAAP operating margin was 47% compared to 49% in the same quarter the prior year. As mentioned earlier, the major factor in the year on year decline in operating margins last quarter was the higher percentage of research and development expense. General and administrative costs rose 21% in constant currency although that cost ratio remained at 3% when rounded. Some of that increase costs related to the merger with Cerner which has now been completed.
For the full year, year research and development expense rose by 11%, and general and administrative expense rose by 5%. Stock based compensation expense rose noticeably last fiscal year, primarily because of Oracle’s hiring activity in the highly competitive research and development cost bucket. The company is projecting that the costs of the merger will lead to some margin contraction in Q1, and EPS is expected not to show material increase compared to the year earlier period. This is net of absorbing about a 4% impact from currency moves. As mentioned above, Oracle has not provided full year 2023 guidance other than to say that the Cerner acquisition, even including the expenses that will be absorbed in Q1.
The company is projecting that it will increase capex somewhat next year. At this point, capex for Oracle is mainly a function of the rate at which it expands its regional data centers to support Oracle's Cloud Infrastructure. It plans to add 6 new regions in the current fiscal year, and increase of a bit more than 15% to its current count of data centers. Thus capex seems likely to be greater than $5 billion, and this probably means that free cash flow generation will be around $10 billion for the full year.
The company’s backlog as mentioned rose quite a bit faster than the increase in reported currencies. On the other hand, the company’s deferred revenue balance did not follow suit. If bookings growth percentages remains at the levels in Q4 and suggested by the company’s guide, at some point it seems likely that deferred revenue growth will become a tailwind to operating cash flow. I have projected that Oracle’s free cash flow margin will reach 17% next year, and it should proceed higher from that point.
Writing about GARP software companies sometimes seems a contradiction in terms. Most investors in the enterprise software space, at least until the last 8 months, have wanted to see growth, and a reasonable path to profitability and cash flow generation. Now... well given the negative sentiment of that has grown over the past few months, at least until last week, it has been more than a bit unclear what investors have been seeking. Oracle is a bit Janus-faced as an investment. I believe that it now offers shareholders double digit organic growth and sky high operating margins, as well as rising cashflow margins. The cost synergies that Oracle will reap from its recently completed acquisition of Cerner don’t really seem to be reflected in current estimates, perhaps because the company itself, has not provided full year projections. The current published consensus for EPS of $5.27 clearly is at odds with management’s projection that the Cerner merger will be accretive in the current fiscal year.
At this point, my projection suggests that Oracle’s 12 month forward EV/S is 4.45X, and as mentioned I believe the company will be able to achieve a free cash flow margin of 17% in that period after absorbing over $5 billion in capex as it ramps the investment in its cloud infrastructure. Those projections result in a free cash flow yield of just less than 4% on the company’s enterprise value. I project that earnings will be greater than $5.80 over the coming year, so the forward P/E ratio is about 12X.
The company's weighted average cost of capital based on the link I provided earlier in this article is about 6.5%. Using 6.5% in a DPV calculation suggests that Oracle's "fair value" is more than 70% above the current share price based on the company achieving 10%+ growth and a free cash flow margin rising to the mid-30% range.
Will those projections be upended by an economic contraction? The kind of contraction that is being forecast by most seems unlikely to really change the trajectory of enterprise IT purchases. That said, there is certainly more uncertainty in the outlook for growth in IT spending than has been seen in accurate years; there is certainly reason to be cautious in terms of expectations given the many unknowables in the environment.
I usually prefer to recommend share gainers in writing about IT investments. Although last quarter was exceptional in terms of data base growth, I doubt that the elements that led to its strength will continue for a full year. There really are many competitors of varying shapes and sizes who have made Oracle’s domination of the data base market of less substance than has heretofore been the case. That doesn’t mean that Oracle’s database revenues won’t grow - they just aren’t likely to grow at the elevated levels achieved last quarter. Oracle, I believe, can be a share gainer in the apps space, and while its cloud infrastructure business isn’t likely to challenge the cloud titans in the foreseeable future, it has a strong growth trajectory which is part of the double-digit growth story as well. Most users perceive performance and functionality advantages to running Oracle apps on it cloud infrastructure.
There are loads of undervalued IT shares out there; it would take weeks of performance like that of Thursday/Friday, 6/23-6/24 to undo the carnage of 8 months, particularly as regards to valuation. But for readers looking for a bit of safety in what has been a hyper-treacherous environment in which to invest in higher growth IT names, Oracle seems to be a reasonable haven. It will never be able to develop the growth or the potential returns of high growth IT, but from current levels there can be significant percentage appreciation.
I'm assigning C3.ai (NYSE:AI) a positive risk/reward rating based on its exceptional leadership team, discounted valuation, fortress balance sheet, its industry-leading position, strong technical underpinnings, and asymmetric potential return profile. Operating within one of the largest secular trends of our time, artificial intelligence, opens the door to explosive growth potential. C3.ai is a top choice for high-risk, high-reward investors seeking exceptional opportunities.
The marketplace broadly expects Artificial Intelligence or AI to be an immense opportunity and views it to be a game-changer technology in the future. By way of logical extrapolation, if it's a game-changer technology, AI will become a requirement for enterprise adoption in order to remain competitive.C3.ai's spring 2022 investor presentation illuminates each of these AI possibilities: Both a game changer and required adoption. The following two screenshots from the presentation summarize the size of the market opportunity and its importance to chief information officers.
In essence, as described in the presentation by C3.ai’s Chairman, CEO, and Co-founder, Thomas Siebel, the software industry is on the brink of a secular growth shift, from a history of descriptive systems to a future of predictive systems.
C3.ai speaks directly to the game-changer nature of AI as well as the competitive requirement for enterprise AI adoption in discussing how customers use its platform and the benefits that are expected to be achieved. The following three screenshots from the spring presentation detail C3.ai’s value proposition.
What's particularly unusual about the customer detail is the precise quantification of economic value across business segments that C3.ai’s platform is expected to deliver. Please note that I have detailed the annual economic benefit expected in the header above each image.
Leading European Utility Company: $6.7 Billion Euros Per Year
$3 Trillion Asset Financial Institution: $3.5 Billion Per Year
Top Five Global Energy Company: $3.8 Billion Euros Per Year
For the three customers above, the expected annual economic benefit to be derived from implementing C3.ai’s platform is $14 billion. This is an extraordinary value proposition across just three clients. If the benefits are achieved, these companies would clearly have a competitive advantage in their respective industries. The value proposition is extraordinary in light of C3.ai’s revenue base of $253 million in its just-completed fiscal year 2022. Based on the above customer details, C3.ai’s platform offers an incredible return on investment and is truly a game changer if the benefits are realized.
C3.ai’s growth strategy is threefold: Penetrate existing customers, expand multi-tiered distribution, and expand its ecosystem.
In terms of penetrating existing customers, C3.ai believes it has reached roughly 5% penetration of its existing client base. As a result, existing customer penetration alone represents an enormous growth opportunity from a $253 million revenue base. If the 5% figure is in the ballpark, existing customers represent a $5 billion opportunity. More conservatively, if penetration is closer to 10%, the opportunity remains substantial at $2.5 billion.
These penetration estimates are well supported by Palantir’s (NYSE:PLTR) customer penetration trajectory. Please refer to my prior Palantir reports for greater detail: Palantir Visibility Into The Upside and Palantir Red Flag Or Opportunity. C3.ai targets similar key customers with similar adoption trends. As a result, Palantir represents an excellent comparable company for valuing C3.ai. Interestingly, similar to Palantir, C3.ai’s existing customer base is quite small at only 218, as can be seen in the following screenshot from the presentation.
Customer growth of 82% is exceptional, although off of a small base. Importantly, C3.ai is targeting large strategic customers for its market entry. These customers represent some of the largest individual opportunities for AI over time. Additionally, as industry leaders, they should help drive C3.ai adoption amongst industry peers. The following screenshot provides color as to C3.ai’s existing customer base.
Shell, the top five energy company highlighted previously, is expected to derive $3.8 billion euros per year of economic value and has decided to standardize on C3.ai’s platform. The following three screenshots provide an excellent overview of how C3.ai’s platform is generally adopted and implemented through time. I have provided a header above each to highlight the process of customer penetration and the visibility that this creates. The screenshots also shine a spotlight on the true nature of the AI opportunity as a continual process rather than a discrete solution.
Shell: Detailed Implementation Plan Through Time
Shell: Detailed Deployment Roadmap Creates Visibility As AI Enables The IoT Revolution
Shell: Detailed Implementation Roadmap Creates Visibility
The same adoption cycle is on display in the next screenshot detailing the US Air Force’s C3 AI implementation.
US Air Force: Detailed Implementation Roadmap Creates Visibility
The US Air Force is nearing year one of its implementation while Shell is approaching year three. C3.ai’s client penetration occurs via a well-defined and detailed implementation roadmap. This process and the long-term strategic nature of AI adoption are conducive to a high degree of visibility into the ultimate opportunity size at each customer. As a result, the company’s estimated 5% penetration, or a more conservative 10% penetration estimate, is likely well supported by internal customer data. Of importance, notice that AI is the application layer that enables the full potential of the IoT or Internet of Things revolution.
The two remaining legs of the C3.ai growth strategy are interrelated and pertain to new customer acquisition. The multi-tiered distribution strategy is comprised of three vectors: Geographic, industry vertical, and partner ecosystem. Segmenting C3.ai’s market penetration strategy by geography is common, as is the segmentation by industry vertical.
The industry segmentation takes on added importance for C3.ai as each industry has its own unique AI requirements. Industry segmentation creates the opportunity for C3.ai to develop standardized industry solutions which are the key to creating economies of scale. Meaning, a primary challenge to broad AI adoption is the cost of developing customized solutions. Customized solutions lack scalability due to the inability to sell them to the broader marketplace. The following screenshot displays C3.ai’s scalable solutions.
The multi-tiered distribution and ecosystem expansion strategies can be visualized in the two images below. They highlight how the strategy was applied to the Shell opportunity. Notice that C3.ai is partnered with a leading energy service company on the top of the cube, Baker Hughes (NASDAQ:BKR), and a leader technology firm on the side of the cube, Microsoft (NASDAQ:MSFT).
C3.ai is partnered with industry leaders in four major verticals: Financial services, aerospace and defense, oil and gas, and utilities. At the same time, it's looking to expand its partnerships with leaders in the remaining industries. This appears to be an optimal approach as the industry leaders know the intricacies of their markets best and can enable more rapid and full penetration of each vertical.
In addition to industry vertical leaders, C3.ai has partnered with all major technology product and service providers. This ensures that it can serve the entire enterprise universe regardless of each company’s existing technology infrastructure. Similar to its industry vertical strategy, C3.ai’s technology partner strategy is the optimal approach in that it's technology agnostic, which ensures C3.ai can compete across the entire AI opportunity set.
The growth strategy being implemented by C3.ai looks to be perfectly suited for the AI market opportunity. It targets industry-leader partners for vertical distribution and all major technology platform leaders for breadth of distribution. As new customers are acquired, they then enter the process of implementation, which offers extraordinary growth potential by fully penetrating each customer’s long-term AI opportunity set.
Importantly, paraphrasing Siebel from the presentation, C3.ai views its AI opportunity to be largely a matter of execution at this stage. Siebel believes there's little market risk in that the AI software opportunity estimate of $600 billion by 2025 is a high confidence industry projection. He views there to be little technology risk as C3.ai is in the marketplace at scale today with a broad and industry-leading AI portfolio. Finally, Siebel believes that there's no meaningful competitive risk in the near term, leaving execution as the key to C3.ai’s success.
In other words, Sibel views C3.ai’s future success to be largely in the company’s control, which is an ideal position. The market’s view of AI and the industry players is more nuanced and understandably confusing as AI is applicable across all information systems. There are an incredible number of firms and products that many consider to be under the AI umbrella. C3.ai captured the market’s view of the competition in the following image.
Upon review, many of the firms and offerings in the above image do indeed compete with C3.ai in terms of specific AI-related applications or features. That said, they do appear to be largely tangential competition, perhaps with the exception of Palantir. The following screenshot demonstrates how many of these leading firms and offerings integrate with C3.ai’s platform approach. They are circled in blue on C3.ai’s console image.
In essence, C3.ai has designed its platform to be a new AI-specific software layer that incorporates the leading-technology tools of the day. The company has positioned itself on top of or parallel to these providers and can accommodate its clients use of their preferred tools. In this respect, C3.ai faces little meaningful competitive risk, as suggested by Siebel. I view Palantir, in the center of the competitive collage, as a natural competitor and possibly a great fit to be a suitor for C3.ai.
Given my view that Palantir is a natural competitor of C3.ai, it's helpful to view C3.ai’s valuation on its own and in relation to Palantir as a comparable enterprise. It should be noted that C3.ai remains an earlier stage company and is unprofitable. Management expects to reach sustainable free cash flow generation within two to three years. This is in line with the lone analyst earnings estimate for 2025.
While the earlier stage nature of C3.ai and the industry generally creates heightened risk, there's heightened opportunity. Investors are well compensated for the heightened risk by C3.ai’s strong balance sheet. The company has a book value of just under $1 billion, which is nearly all cash and equivalents. C3.ai has a fortress balance sheet from the perspective of its early stage of growth.
Due to the lack of current earnings and the nature of C3.ai’s secular growth opportunity, sales estimates are the most important metric for intermediate-term valuation purposes. The table below was compiled from Seeking Alpha and displays consensus sales estimates for C3.ai (the top section) and Palantir (the bottom section). I have highlighted in yellow the consensus growth rates, and in blue the current valuation to sales.
Notice that the expected growth rates are nearly identical over the coming three years, while C3.ai trades at a substantial discount to Palantir. In my prior Palantir reports, I cover the challenge that Palantir faces in terms of its traditional customized software development approach. Palantir has discussed its priority to address this in referring to “productizing” its offerings in accurate times.
Given its scalable industry solutions outlined above, C3.ai should have a distinct market advantage in the AI space. The value proposition on offer from C3.ai, $14 billion across three companies outlined above, should be well received across the broad marketplace. It should be noted that Palantir is taking a much broader approach than AI with its platforms. This too opens the door for C3.ai, an AI-focused company, to gain significant traction across the broad AI opportunity set.
C3.ai’s 30% discount to Palantir on a price-to-sales basis points to the opportunity for multiple expansion. This offers a relative buffer within a generally high valuation multiple industry. In fact, many leading application software companies trade in the 12.65x sales range today. Relative to the AI opportunity set and its software peers, C3.ai trades at a substantial discount. The discounted valuation is further reinforced by roughly $9 per share of net cash on C3.ai’s balance sheet.
C3.ai’s executive leadership offers additional downside support and enhanced execution potential. Siebel created the leading CRM platform prior to Salesforce (NYSE:CRM), Siebel Systems, which was acquired by Oracle. Many of the Siebel Systems veterans are with C3.ai, and the board of directors appears to be top quality. I have included two screenshots below for those interested in the executive leadership details.
Next, I will walk through the price action which appears quite constructive, and then wrap things up.
The technical backdrop for C3.ai is one of well-defined resistance levels (the orange lines on the charts below) and emerging signs of strong support (the green line). The following three-year weekly chart provides a bird’s eye view of C3.ai’s trading history. Notice that the company came public during the most speculative phase of the bull market in December 2020 and opened at $100 per share. The shares are currently priced near $19 or roughly -80% below the opening price.
There are six well-defined resistance levels highlighted by the orange lines, which represent upside technical price targets. Only one support level is visible, which is represented by the green line and is the primary downside technical price target. The return potential to each of these targets and other key levels discussed above are summarized in the table below.
I have highlighted in yellow what I view as a high probability potential return spectrum over the short term (0 to 1 year). The blue highlighted cells represent an additional high-probability potential return spectrum over the nearer term (0 to 3 years).
The following 1-year daily chart provides a closer look at the first three technical upside targets and the primary support level. Please note that the gold trend line is the 50-day moving average (near $18) while the grey line is the 200-day moving average ($27.54). The moving averages represent additional support (50-day MA) and resistance (200-day MA) levels.
While the upside resistance levels are clearly defined and well above the current price, the most interesting technical behavior is in relation to the primary support level (the green line). C3.ai provided disappointing guidance when it reported its fiscal year 2022 fourth quarter results on June 1, 2022. The stock sold off nearly 20% the next day in reaction to the company’s cautious guidance, before finishing the day down only 5%. C3.ai went on to rally over 12% the following day.
Importantly, in the above chart, notice the massive volume surge over the three days following the guidance cut on June 1, 2022. What's interesting is that C3.ai did not breach its prior closing low of $13.85 reached on May 11, 2022. In essence, lower near-term growth was already priced into the shares compared to what was guided to by management on June 1, 2022. This type of price behavior in reaction to a large guidance cut is generally bullish, especially when accompanied by a surge in trading volume as this points to heavy accumulation.
Management guided to mid-20% revenue growth in the near term due to week macroeconomic conditions. Previous expectations were for revenue growth in the mid-30% range. Of note, on the Q4 2022 conference call, management stated that 30% to 35% revenue growth remains achievable under more favorable macroeconomic conditions.
Given the price action since March 2022, the green support level now resembles the neckline of an inverted head and shoulders bottom formation. This level has been thoroughly tested and held since March 2022, which suggests the area near $16 should offer exceptionally strong support. The following six-month daily chart provides a closer look at the bottoming pattern.
Notice that the shares are sitting on top of the 50-day moving average (the gold line). Business conditions could deteriorate further in the short term which would open the door to further downside risk below the primary support level. That said, technically speaking, C3.ai has carved out a substantial bottom formation while exhibiting bullish price action in response to materially reduced guidance.
It should be noted that C3.ai has a dual class structure with the voting power vested in Siebel. This renders C3.ai ineligible for inclusion in most indices. While this theoretically lends itself to less liquidity in the shares, it can be a material positive from a technical perspective in a bear market.
On the upside, with heavy insider ownership and a public float of only 80 million shares, the supply of shares could become quite tight if C3.ai continues to execute successfully. This dynamic could offer a powerful boost to upside momentum under bullish conditions for C3.ai.
The technical setup appears quite bullish from a long-term investment perspective as it's an ideal environment for those looking to accumulate the shares. In fact, from the perspective of a long-term investor, one would be hard pressed to find a larger secular growth opportunity than artificial intelligence universally applied. C3.ai is a uniquely positioned pure play on this megatrend with an exceptional leadership track record. The discounted valuation and fortress balance sheet further reinforce C3.ai as a top asymmetric risk/reward opportunity for those seeking exceptional growth potential.
Thank you for reading. We continually curate the most asymmetric and broadly relevant risk/reward opportunities of our times. The stoxdox platform is designed to empower all investors by providing the highest quality, unbiased, professional analysis delivered in an actionable format. We will be launching a Seeking Alpha Marketplace in the near future. Please follow us to keep abreast of updates and the coming Marketplace launch.
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Jul 11, 2022 (Market Insight Reports) -- The latest Project Portfolio Management (PPM) Market Analysis is designed to help clients Strengthen their market position, and in line with this, this report provides a detailed analysis of several leading Project Portfolio Management (PPM) market Key Players including Ca Technologies, Changepoint, Clarizen, HPE, Microsoft, Oracle, Planview, Planisware, SAP, Servicenow, Software AG, Upland, Celoxis Technologies, and Others. Also, the Project Portfolio Management (PPM) market analysis report includes information on upcoming trends and challenges that will influence market growth. This is to help companies strategize and leverage all forthcoming growth opportunities.
Our Experts will help you get valuable insights about Project Portfolio Management (PPM) market share, size, and regional growth prospects. Available Other Related Market Research Reports
Sample PDF Report at- https://reportsinsights.com/sample/592501
Project Portfolio Management (PPM) Market showcases an in-depth analysis of the overall Project Portfolio Management (PPM) market in terms of market size, upstream situation, price & cost, industry environment, segmentation for Project Portfolio Management (PPM) providers, end-users, geographies, and analysis up to 2028. In addition, the report outlines the factors driving industry growth and the description of market channels.
This has brought along several changes in this report also covers the impact of COVID-19 on the global market.
The market research report covers the analysis of key stakeholders of the Project Portfolio Management (PPM) market. Some of the leading players profiled in the report include: Ca Technologies, Changepoint, Clarizen, HPE, Microsoft, Oracle, Planview, Planisware, SAP, Servicenow, Software AG, Upland, Celoxis Technologies
The research insights presented in this report are backed by a deep understanding of key insights gathered from both secondary and primary research. The opinions and insights presented in the Project Portfolio Management (PPM) market report were influenced by discussions held with several players in this industry. the Project Portfolio Management (PPM) market report highlights the key players and manufacturers and the latest strategies including new product launches, partnerships, joint ventures, technology, segmentation in terms of region and industry competition, profit and loss ratio, and investment ideas. A precise evaluation of effective manufacturing techniques, advertisement techniques, Project Portfolio Management (PPM) market share, size, growth rate, revenue, sales, and value chain analysis.
The 'Global Project Portfolio Management (PPM) Market Research Report' is a comprehensive and informative study on the current state of the Global Project Portfolio Management (PPM) Market industry with emphasis on the global industry. The report presents key statistics on the market status of the global Project Portfolio Management (PPM) market manufacturers and is a valuable source of guidance and direction for companies and individuals interested in the industry.
Major Product Types covered are:
Major Applications of Project Portfolio Management (PPM) covered are:
Banking, Financial Services, and Insurance (BFSI)
ITES and telecommunication
Retail and consumer goods
Healthcare and life sciences
Government and public sector
Regional Project Portfolio Management (PPM) Market (Regional Output, Demand & Forecast by Countries):-
North America (United States, Canada, Mexico)
South America ( Brazil, Argentina, Ecuador, Chile)
Asia Pacific (China, Japan, India, Korea)
Europe (Germany, UK, France, Italy)
Middle East Africa (Egypt, Turkey, Saudi Arabia, Iran) And More.
Access full Report Description, TOC, Table of Figures, Chart, etc. at-https://www.reportsinsights.com/industry-forecast/project-portfolio-management-ppm-markets-growth-trends-592501
The report is useful in providing answers to several critical questions that are important for the industry stakeholders such as manufacturers and partners, end-users, etc., besides allowing them in strategizing investments and capitalizing on market opportunities.
Reasons to Purchase Global Project Portfolio Management (PPM) Market Report:
1. Important changes in Project Portfolio Management (PPM) market dynamics
2. What is the current Project Portfolio Management (PPM) market scenario across various countries?
3. Current and future of Global Project Portfolio Management (PPM) market outlook in the developed and emerging markets.
4. Analysis of various perspectives of the market with the help of Porter's five forces analysis.
5. The segment that is expected to dominate the Global Project Portfolio Management (PPM) market.
6. Regions that are expected to witness the fastest growth during the forecast period.
7. Identify the latest developments, Global Project Portfolio Management (PPM) market shares, and strategies employed by the major market players.
8. Former, ongoing, and projected Project Portfolio Management (PPM) market analysis in terms of volume and value
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Jul 11, 2022 (Heraldkeepers) -- New Jersey, United States-In the following decade, the global Enterprise Information Management Market is supposed to altogether rise. With personalisation on the ascent, the medical care industry isn’t expected to be safe. Not exclusively may the patient’s clinical history be digitized, yet additionally the preparatory activities that ought to be finished. This is the way the medical care industry will work before long.
The statistical surveying Enterprise Information Management Market report is a careful and top to bottom assessment of the current state of the business by specialists. This measurable reviewing report gives the most forward-thinking market data and future patterns, permitting you to recognize the things and end clients that are producing income development and advantage. It centers around the genuine drivers and limitations for the significant partners, as well as the ebb and flow challenge status and future improvement potential.
The worldwide Enterprise Information Management market is expected to grow at a booming CAGR of 2022-2030, rising from USD billion in 2021 to USD billion in 2030. It also shows the importance of the Enterprise Information Management market main players in the sector, including their business overviews, financial summaries, and SWOT assessments.
Enterprise Information Management Market Segmentation & Coverage:
Enterprise Information Management Market segment by Type:
Cloud Computing, Big Data, Others
Enterprise Information Management Market segment by Application:
Aerospace & Defense, BFSI, IT and Telecommunication, Energy and Power, Government, Healthcare, Hospitality, Retail, Transportation and Logistics
The years examined in this study are the following to estimate the Enterprise Information Management market size:
History Year: 2015-2019
Base Year: 2021
Estimated Year: 2022
Forecast Year: 2022 to 2030
Cumulative Impact of COVID-19 on Market:
During the COVID-19 scourge, the business is offering basic help to states’ advanced framework the whole way across the world. People and legislatures at all levels, government, state, focal, metropolitan, and commonplace, have been in persistent contact to supply and get continuous data on COVID-19.
Get a demo Copy of the Enterprise Information Management Market Report: https://www.infinitybusinessinsights.com/request_sample.php?id=837736
APAC (Japan, China, South Korea, Australia, India, Rest of APAC is additionally sectioned into Malaysia, Singapore, Indonesia, Thailand, New Zealand, Vietnam, and Sri Lanka) and Europe (Japan, China, South Korea, Australia, India, Germany, UK, France, Spain, Italy, Russia, Rest of Europe is additionally divided into Belgium, Denmark, Austria, Norway, Sweden, The Netherlands, Poland, Czech Republic, Slovakia, Hungary, and Romania).
The Key companies profiled in the Enterprise Information Management Market:
The study examines the Enterprise Information Management market’s competitive landscape and includes data on important suppliers, including IBM, Oracle, Open Text, EMC, SAP, OpenText, OTSI,& Others
Table of Contents:
List of Data Sources:
Chapter 2. Executive Summary
Chapter 3. Industry Outlook
3.1. Enterprise Information Management Global Market segmentation
3.2. Enterprise Information Management Global Market size and growth prospects, 2015 – 2026
3.3. Enterprise Information Management Global Market Value Chain Analysis
3.3.1. Vendor landscape
3.4. Regulatory Framework
3.5. Market Dynamics
3.5.1. Market Driver Analysis
3.5.2. Market Restraint Analysis
3.6. Porter’s Analysis
3.6.1. Threat of New Entrants
3.6.2. Bargaining Power of Buyers
3.6.3. Bargaining Power of Buyers
3.6.4. Threat of Substitutes
3.6.5. Internal Rivalry
3.7. PESTEL Analysis
Chapter 4. Enterprise Information Management Global Market Product Outlook
Chapter 5. Enterprise Information Management Global Market Application Outlook
Chapter 6. Enterprise Information Management Global Market Geography Outlook
6.1. Enterprise Information Management Industry Share, by Geography, 2022 & 2030
6.2. North America
6.2.1. Market 2022 -2030 estimates and forecast, by product
6.2.2. Market 2022 -2030, estimates and forecast, by application
6.2.3. The U.S.
184.108.40.206. Market 2022 -2030 estimates and forecast, by product
220.127.116.11. Market 2022 -2030, estimates and forecast, by application
18.104.22.168. Market 2022 -2030 estimates and forecast, by product
22.214.171.124. Market 2022 -2030, estimates and forecast, by application
6.3.1. Market 2022 -2030 estimates and forecast, by product
6.3.2. Market 2022 -2030, estimates and forecast, by application
126.96.36.199. Market 2022 -2030 estimates and forecast, by product
188.8.131.52. Market 2022 -2030, estimates and forecast, by application
6.3.4. the UK
184.108.40.206. Market 2022 -2030 estimates and forecast, by product
220.127.116.11. Market 2022 -2030, estimates and forecast, by application
18.104.22.168. Market 2022 -2030 estimates and forecast, by product
22.214.171.124. Market 2022 -2030, estimates and forecast, by application
Chapter 7. Competitive Landscape
Chapter 8. Appendix
What are the different utilizations of valuable metals?
What are the principal components that are pushing the Enterprise Information Management market forward?
What is the main snag to worldwide Enterprise Information Management market extension?
What are the overall Enterprise Information Management market’s most significant districts?
International: +1 518 300 3575
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Product Leader at Conga | Investor | Autodidact.
In my last post, "Netflix And Tacos: The Drivers Of Innovation In Subscription And Billing Management," I discussed a brief history of billing and subscription management as a service. This post will build on that. I’m sorry to disappoint you if you came back for more Netflix or tacos (or both)—this post offers neither, though it does provide a full serving of information about the current state of the market and how it's evolving.
The Current State Of The Billing And Subscription Management Market
According to Zuora, the total addressable market is approaching $9 billion, with nearly 60% of this consisting of home-grown or "local market" solutions. Close to 25% of this market is in the hands of Enterprise Resource Planning (ERP) providers like SAP or Oracle, and the balance is held by legacy players and by Zuora itself.
It's a sizable market that I liken to a neighborhood now mostly inhabited by aging original owners that is turning over to families with young children at an accelerating pace. At some point, maintaining and updating these houses doesn't make sense for one or two inhabitants and gives way to more economical solutions.
What’s driving the "neighborhood turnover?" Demand, as discussed in my previous post, starts with changing customer expectations (more subscription and consumption-based charges versus one-time purchases) that lead companies to consider altering existing or creating new business models.
Because of this, companies need operational agility and thus flexible billing and invoicing systems, often with self-service capabilities. As noted by MarketsandMarkets, this is driving the shift from home-grown or customized systems ("original owners") due to poor relative economics of this approach versus outsourcing to third parties focused in this area.
How New Players Can Compete
This is a crowded space, as I wrote in my previous article, and one that’s becoming commoditized. So how do providers go to market? I believe that vendors tend to approach it from a few different angles and core areas of expertise, including:
4. Accounts receivable automation
5. Billing first
These providers also tend to target specific segments, stratified by company size, use case complexity, high- and low-volume scenarios and a subscriptions-focus versus billing in multiple ways (one-time, subscription, usage, evergreen, etc.). Industry focus also varies by provider, and some focus exclusively on specific sectors (e.g., telecom). Beyond that, geography is relatively important.
The "old neighborhood" didn’t have an HOA fee, but the new one does. How exactly is it priced? Vendors in this space will typically price based on the volume of transactions, revenue, billing volume or some combination.
Just as several vendors handle usage-based pricing, they themselves may charge in this fashion. Discounts, of course, accrue to customers with larger volumes, and there is often a minimum fee as well. Some have flat fees, but the majority charge in some fashion that varies with volumes. This largely reflects billing provider business models which themselves have variable costs (think AWS pay-as-you-go pricing).
The Market Going Forward
Billing and subscription providers compete in a large, fragmented, growing market. While smaller customers may be well served by "off-the-shelf" offerings, customization is the rule, rather than the exception, in large enterprises. One-size-fits-all does not exist, so providers must be able to offer a product that can be customized effectively for numerous use cases.
It is an interesting space to be involved in, as the neighborhood "turns over" and customers increasingly see the benefits of buying third-party solutions rather than managing in-house.
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Enterprise Asset Management Market Scope
The global Enterprise Asset Management market report published recently has a detailed study of each and every minute part of the Enterprise Asset Management market trends, opportunities, segments which offers an overview of the market in easy to understand market. Straits Research being in the market research industry for a long time now has earned the reputation of being one of the most trusted and genuine market research and Intelligence Company.
Enterprise Asset Management Market Will significantly Grow At CAGR of 11.5% By Forecast Period
The report looks at the growth potential of the Enterprise Asset Management market across different industrial segments, as well as the factors that drive the market forward, the opportunities in the market, and the possible barriers that would stop the market from growing. It also looks at the latest news and changes made by the most important competitors in the market.
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Top Market Players
The Enterprise Asset Management Market report gives a detailed, in-depth analysis of the competitors in the industry, including their history, financial and organizational growth, accurate updates up to the date the report is published, etc., as well as their future plans.
Oracle, IFS, Infor, IBM, SAP, ABB, Intelligent Process Solutions (IPS), Schneider Electric, Aptean, CGI Inc., Rfgen Software, AssetWorks, LLC, Ultimo Software Solutions, Mainsaver, Inc., Ramco Systems, SwainSmith, Inc., Upkeep Maintenance Management, eMaint by Fluke Corporation, Siveco Group SA, Maintainence Connection, Yardi Systems, Inc., Planon, and Optiware among others
The company uses a streamlined research process and strict guidelines and methods to estimate the size of the global Enterprise Asset Management market and make predictions about how much money it will make and how fast it will grow (CAGR) over the forecasted period.
The market study and in-depth analysis are done by mining data from secondary sources, such as company websites, annual reports, press releases, financial data, investor presentations, white papers, certified publications, and government publishing sources, about the sales of the key vendors.
The report gives an in-depth look at the latest industry trends and developments in each segment and sub-segments for the period 2020–2030. The report also looks at the Global Enterprise Asset Management Market’s different sub-segments and groups. It gives real and accurate information about the market in a way that makes it easy to understand.
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Component, Deployment, verticle
The Global Enterprise Asset Management Market Report forecasts the revenue growth with respect to significant geographies like –
Other features of the report
If you are interested after studying this, you might want to learn more about the Global Enterprise Asset Management Market. Straits Research has put out a detailed research report on the Global Enterprise Asset Management Market that you need to read to do that.
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Oracle ORCL recently introduced Oracle Utilities Agent Service, a cloud application specifically for utility customer service teams. Agent Service combines Fusion CX and utility applications to Strengthen customer service while boosting sales.
It brings billing, usage, and interaction history together in a single dashboard to provide agents with a holistic view of each customer.
Combined with new AI-powered tools that guide agents to the next best action, the application lets agents see how customers are interacting with the utility across all available service channels, including phone, web, email, chat, and SMS.
Agent Service is the latest offering in Oracle Customer Experience (CX) for Utilities, a suite of integrated customer experience and utility-specific cloud applications for billing, rating, payment processing, collections, advanced metering, and energy efficiency.
Oracle Corporation price-consensus-chart | Oracle Corporation Quote
Global cloud adoption continues to expand as business models transform and the demand for secure remote technology accelerates.
The company’s software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) products are likely to grow strongly over the next few years as enterprises rapidly migrate to the cloud environment.
Oracle’s performance is also gaining momentum across the cloud business, driven by the strong uptake of OCI services and Autonomous Database offerings. The healthy adoption of cloud-based applications, comprising NetSuite Enterprise Resource Planning (ERP), Fusion ERP and Fusion Human Capital Management (HCM) bodes well for the long term.
This Zacks Rank #3 (Hold) company is focused on upgrading and expanding its cloud solutions portfolio to keep up with the rising demand. Oracle shares are down 19.2% year to date compared with the Zacks Computer – Software industry’s fall of 22.8% and the Computer and Technology sector’s decline of 27.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
An expanding clientele is enabling the company to maintain its leading position in the cloud ERP market. Management is optimistic regarding the latest Oracle Fusion Cloud ERP, HCM and Enterprise Performance Management ("EPM") applications. The company’s HCM and ERP clientele base also include Morgan Chase, Santander, Bank New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole and many others.
Apart from Oracle, the HCM space is dominated by the likes of Workday WDAY, SAP SE SAP and Automatic Data Processing ADP.
SAP’s SuccessFactors Solutions’ suite is the mainstay of the company’s HCM solutions. Last year, the company added a new cloud-based solution— the SAP SuccessFactors Time Tracking — to the SAP SuccessFactors Human Experience Management solutions’ portfolio.
Workday’s top line is being driven by high demand for its HCM and financial management solutions. Some of the notable HCM deal wins for Workday include Novartis, DraftKings, and CTBC Bank.
Automatic Data Processing is one of the leading names in the cloud-based HCM solutions space. The company has expanded its footprint in the HCM market through multiple acquisitions that include Celergo, WorkMarket, and The Marcus Buckingham Company.
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