Oracle Still A Market Perform At JMP: Here's Why

In a report published Friday, JMP Securities analyst Patrick Walravens maintained a Market Perform rating on Oracle Corporation ORCL, saying that Executive Chairman Larry Ellison’s comments on the use of the company’s database by SAP SE (ADR) SAP (rated Market Outperform, PT at $80) seemed “somewhat exaggerated.”

Mr. Ellison said during Oracle’s earnings call that SAP had purchased database licenses to run its own cloud line of business offerings over the last 12 months and had paid to use Oracle's database to run Ariba Inc ARBA, SuccessFactors Inc SFSF and Concur Technologies, Inc. CNQR.

JMP Securities’ report quoted Mr. Ellison as saying, “SAP does not use HANA in the cloud very much. I know that because they keep paying us - again this quarter - they paid us for Oracle for Concur, and Oracle for Ariba, and Oracle for SuccessFactors. If they're using HANA for anything, I don't know about it.”

Analyst Patrick Walravens believes that the remarks made by Mr. Ellison appear “somewhat exaggerated” in view of the comments made by a SAP spokesperson stating that:

• “All SAP solutions (both on-premise and cloud) are being ported to HANA, with the S/4 HANA solutions going first and the line of business cloud solutions ongoing
• SuccessFactors has already migrated its key internal systems to SAP HANA, replacing Oracle, although a few outlier internal systems remain on Oracle for the time being
• The SuccessFactors and Ariba customer platforms ran on Oracle at the time of acquisition and are in the process of migrating to HANA, while some modules are already live on HANA, such as Ariba Spend Visibility and Employee Central Payroll
• The Concur acquisition was closed in December 2014, so migration is still in the planning stage
• Oracle licenses are renewed while these migrations are being completed.”

Walravens estimates Oracle’s non-GAAP EPS for 2016 and 2017 at $2.61 and $2.88, lower than the consensus estimates of $2.78 and $2.99, respectively.