Oracle posted strong third-quarter numbers yesterday with continued cloud growth, but there was an elephant in the room in the form of renewed speculation around the company’s relationship with TikTok.
According to industry scuttlebutt, TikTok is setting up a deal for Oracle to store US user data without its parent company, China’s ByteDance, having access to it. Previously, US authorities had raised security concerns over Oracle’s entry into talks about a stake in TikTok, fearing that such data could end up being passed on to the Chinese government.
But while Oracle released its quarterly numbers, TikTok was certainly not on the agenda, with CEO Safra Catz simply stating:
The only thing I can tell you is that we have a great relationship with the folks at TikTok.
Revenue for the quarter ended Feb. 28 was $10.51 billion, up 4% year-on-year, with net income down 54% year-on-year to $2.32 billion dollars, the latter being impacted by higher spending to support the rise of cloud services. The company is poised to pump $4 billion into data centers and cloud infrastructure this year, Catz said:
We have made a lot of investments. Basically, our CapEx this year is double from last year, and that’s because we deployed a lot of capabilities around the world. At the same time, our income has increased.
But there was an important change, she added:
Over the past few years, we’ve had parts of the business that were important parts of the business that have gone down. And now, as you see in this quarter, for example, all lines of business are growing.
For his part, CTO Larry Ellison spoke about what he dubbed “business as usual,” his descriptor of the company’s continued cloud growth:
Overall we are making incredible progress, gaining more and more in the ERP and HCM back office. The third quarter was an exceptionally strong quarter for cloud ERP sales. We now have over 10,000 Fusion ERP, HCM customers… We’ve been in this business for quite a long time. We are starting to see ourselves grouping together certain industries, starting with the largest industry on Earth, healthcare.
With Oracle’s $28.3 billion bid for medical technology provider Cerner still going through necessary regulatory steps, this focus on healthcare comes as no surprise. Ellison quoted Oracle’s existing footprint size here:
We already have Tenet Health, Kaiser, Mayo Clinic, Cleveland Clinic, Northwell Health, Mount Sinai, Atrium Health. I can list a long list of ERP and HCM wins in healthcare, they are all healthcare providers. We’ve added a few more healthcare providers, mostly hospitals and clinics. We added CHS Community Health Services. It’s a consortium, it’s 83 hospitals, and it’s an ERP, HCM, SCM win there.
And to Oracle’s pantheon of rivals is added Kronos, which has gained specific name-checking as the vendor to replace in the healthcare market. Ellison argued:
While [hospitals are] not acknowledged to have similarities with Uber, they have a lot of people who work in hospitals who are not hospital employees. Hospitals have a gig economy. Doctors work in several hospitals, several clinics, have their own offices. Nurses, same thing. Hospital workforce planning and compensation is one of the most complicated things going on in our changing economy. And we’ve tailored our HCM systems to help hospitals recruit, track, schedule, and pay their healthcare professionals.
Only Kronos – dubbed “someone not well known” – provided that capability, Ellison said. Not even HCM champion and longtime Oracle target Workday – also named – can offer what Oracle can bring to the table, he insisted:
It is for this whole ecosystem that we develop specific features and functions, in order to automate healthcare at all levels. No one has been able to roll up health care. It was kind of packed – that part of only providers, only outpatient clinics, only inpatient hospitals, only payers, only pharmaceutical company, only medical device. We aim for the whole integrated ecosystem and we obtain excellent results. Obviously, this influenced our decision to buy Cerner.
While he cited a number of other verticals and listed his client success stories, Ellison’s focus on healthcare was what stood out in the post-earnings analyst call. Given the scale of Cerner’s planned acquisition, it was already clear that it would be a big roll of the dice. It’s a very US-centric bet in many ways. For example, Ellison cited a particular functional target area to address:
One thing a doctor does is that before I can authorize a test, before I can authorize a prescription for a drug for a patient, I have to check with the insurance company to make sure they will pay. Doctors and hospitals therefore spend a lot of time negotiating with the payer, the insurance company. Well, OK, given these symptoms, can I get paid for this test? Yes No? Given these symptoms, can I charge for this medication? Yes No? We automate this interaction between payers and providers. We are adding many industry-specific features to automate interactions across the ecosystem. And that’s why we think we’re well positioned to grow healthcare, which is a huge industry. Nobody’s ever really tried this before, but we’ve got all the pieces. We have the payment documents. We automate a lot of insurers.
This is not a model that countries with predominantly state-run health systems could recognize as much, although given the creeping privatization of many of these national models around the world, this may no longer be the case for a very long time. And it’s clear that health care is about more than insurance and payments, as Ellison noted:
We have HCM, which allows us to help them manage their workforce. We have an ERP, which helps them track inventory. And, soon, we will have Cerner, which will help them provide patient care… We have the whole portfolio, and we are interconnecting all the elements so that we can make this ecosystem work effectively for the first time.
And in fact, the pandemic has shown that we desperately need such an integrated system…I think the benefits for every patient in the world will be enormous. We need to. The pandemic has revealed various weaknesses in our health systems. We have the technology to fix those weaknesses, and that’s what we’re going to do.
So all Oracle needs now is approval to move forward with the Cerner deal. According to Catz, this could close this next quarter, but it did not take this into account in its outlook.
As for “business as usual”, there is clearly room for a lot more expansion here in the coming years and a lot more competition with other SasS vendors, Ellison stating:
Even though we now have 10,000 customers in Oracle ERP Fusion, almost 30,000 other customers in total, including NetSuite, I still think we are in the very early days.
And Tik Tok? Time will tell us.