Amazon’s Q3 Earnings Miss Sparks Conversation About Ability Of AWS To Fend Off Competition From Microsoft, Oracle and Google

Amazon reported earnings per share of 52 cents on Thursday, missing the earnings target of 78 eps predicted by analysts by a margin that, in combination with other data points from the earnings report, subsequently sent the stock plummeting by 5% in trading on Friday. For the quarter ending September 30, 2016, the company reported revenue of $32.71 billion that slightly exceeded Wall Street estimates of $32.69 billion. Meanwhile, Amazon’s revenue guidance for the fourth quarter between $42 billion and $45.5 billion leaned toward the lower side of the spectrum of Wall Street’s expectation of $44.58 billion. To make matters even more worrisome for investors, Amazon projected operating income of between zero and $1.25 billion for the fourth quarter, whereas Wall Street had projected $1.62 billion. On a positive note, the company’s cloud services business unit, Amazon Web Services, claimed revenue of $3.23 billion, an increase of 55% in comparison to the $2.08 billion from the third quarter of last year that surpassed Wall Street’s expectation of $3.17 billion. Amazon explained its less than stellar earnings report by noting its heavy investments in original video content for Amazon Prime as well as fulfillment centers. Nevertheless, Amazon’s earnings per share miss and third quarter results more generally raised eyebrows in both the technology and investor community after a year of impressive growth and the preservation of its lead in the cloud computing space despite intensified competition. Axcient CEO Justin Moore remarked on Amazon’s recent earnings miss as follows:

Despite the Q3 EPS miss, over the longer-term, Amazon will continue to be a dominant force in both e-commerce and enterprise infrastructure – an incredible feat given that the customer sets are on the opposite ends of the spectrum. Amazon has been very clear that it will continue to focus on growth and not profitability. Investors have signed up for this approach for years so the blip in the stock will be tempered. Bezos has Amazon ‘primed’ for a dominant push to 2020 – and beyond. AWS and Prime continue to be Amazon’s primary growth and revenue drivers as the Seattle company broadens its lead in online commerce and cloud-computing services. The only real question for Amazon comes down to two factors: 1) its ability to appease investors appetite for ongoing record growth and 2) can it continue to maintain its lead over Microsoft, Google and Oracle who are equally committed to winning the cloud and have the benefit of being second mover which can be a benefit in these situation as infrastructure ages out and size and scale become inhibitors to innovation and performance. Expect to see all leverage M&A to acquire their way to technical leadership and hold an edge over the competition. That said, while there is plenty of startup talent to be bought at a premium, I don’t see Amazon losing this race anytime soon.

Here, Moore opines that Amazon’s ability to manage investor expectations and shake off the “second mover” advantage had by competitors such as Microsoft, Google and Oracle will determine whether it can continue the dominance in “e-commerce and enterprise infrastructure” that it has delivered, to date. Moore also notes that second movers stand to benefit from their ability to outpace the “size and scale” of their competitors with enhanced agility and innovation. Herein lies the stakes of Bezos’s gamble on innovation and investment in Amazon’s infrastructure: if Amazon can, indeed, afford to innovate on the rapidly expanding scale of its business and cloud operations with the agility of its competitors by re-investing resources acquired through its meteoric growth to date, Amazon stands poised to radically reconfigure the technology landscape over the next ten years in ways analogous to the disruption that Amazon Web Services brought to the cloud computing landscape. But in the event that the size and complexity of Amazon’s infrastructure mitigates against its ability to continue to deliver innovation, the chances of competitors such as Oracle and Google catching up to it, at least on the cloud services front, increase dramatically. According to Amazon’s CFO, Brian Olsavsky, Amazon built 18 new fulfillment centers in the third quarter while investing heavily in video content to enable Amazon Prime’s video services offerings to compete with Netflix. With respect to Amazon Web Services, however, one obvious question investors may have following last week’s earnings report concerns how Amazon intends to invest in AWS in response to Google’s rebranding of its cloud-based products and services coupled with Google’s aggressive emphasis on professional services for the enterprise.

Oracle Partners With Verizon To Deliver Enhanced Connectivity Solutions For The Oracle Cloud

Oracle has partnered with Verizon to enable customers of the Oracle Cloud to use Verizon’s Secure Cloud Interconnect service to connect to Oracle Cloud infrastructures in the U.S. and Europe. Oracle’s partnership with Verizon’s Secure Cloud Interconnect service enhances the ability of enterprise customers to migrate workloads to the Oracle Cloud in addition to delivering improved connection reliability and lower latency. The collaboration between Verizon and Oracle to deliver Verizon’s Secure Cloud Interconnect for Oracle FastConnect gives Oracle Cloud customers augmented capabilities to customize and monitor network performance using Verizon’s SDN functionality. Furthermore, Verizon Secure Cloud Interconnect supports Oracle Cloud capabilities such as dedicated, high speed MPLS connections as well as access to data spanning hybrid cloud infrastructures. Oracle’s partnership with Verizon underscores the seriousness of its intent to develop its cloud business and is likely to presage a bevy of future partnerships that empower it to build next generation cloud computing infrastructures that can compete with Amazon Web Services, per Oracle CTO Larry Ellison’s bold proclamation that “Amazon’s lead is over” at its OpenWorld Conference in San Francisco in September.

Oracle Acquires LogFire, Cloud-based Warehouse Management Company

Oracle has acquired LogFire, an Atlanta-based company that developed a cloud-based platform that helps companies manage product inventory. LogFire will join Oracle Supply Chain Management (SCM), the supply chain management component of Oracle’s cloud business. LogFire’s cloud-based warehouse management platform delivers an integrated warehouse, inventory and workforce management platform that tracks products located in 250 stores. The platform empowers organizations to implement scalable warehouse management solutions that help them optimize their inventory management, fulfillment and sourcing practices. LogFire customers include Sears, Glad and Ryder rental trucks. Terms of the acquisition were not disclosed.

Oracle Acquires Opower, Cloud-based Data And Performance Management Provider For Utility Companies

Oracle has acquired Opower, provider of cloud and big data solutions to global utility companies such as PG&E, Excelon and National Grid, for roughly $532M or $10.30 per share. Opower stores data from meter readings of over 60 million end customers of utility companies and subsequently analyzes those meter readings to help utility companies achieve regulatory compliance, optimize performance, decrease costs and improve the customer experience more generally. Opower will join Oracle Utilities in a union that marks one of the industry’s largest provider of cloud and big data solutions to utility vendors. The transaction is expected to be finalized in 2016 and comes head on the heels of last week’s purchase of Textura, provider of cloud-based contract and payment services for the construction industry, for $663M.

Oracle’s Acquisition Of Ravello Systems Promises To Integrate Portability Into Oracle Public Cloud

Oracle and Ravello have entered into an agreement whereby Ravello will be acquired by Oracle as noted in a February 22 blog post by Rami Tamir, CEO of Ravello Systems (Ravello). The Ravello team will become part of the Oracle Public Cloud group and Ravello’s technology will be integrated into the Oracle Cloud. Ravello’s proprietary, nested HVX hypervisor allows customers to replicate application infrastructures within public clouds in conjunction with a rich visual interface used for creating a blueprint of an application and its constituent parameters. As a result, Ravello customers can migrate applications to public clouds without costly re-architectures through a simple, drag and drop user interface. The acquisition of Ravello by Oracle represents a huge coup for the Oracle Public Cloud given the uniqueness of Ravello’s nested virtualization technology as an enabling tool for migrating workloads to the public cloud for dev and test use cases, disaster recovery, production usage or even or security, penetration and malware testing. By acquiring Ravello Sytems, Oracle promises to integrate cloud portability into its product offerings and subsequently differentiate itself from Amazon Web Services, Microsoft Azure and the Google Public Cloud. Terms of the acquisition were not disclosed but VentureBeat claims that Oracle paid $500M for Ravello Systems.

Oracle To Hire 450 Cloud Sales Professionals In Dublin

Oracle has pledged to hire 450 cloud computing sales professionals in Dublin, Ireland. Oracle’s decision to hire cloud sales staff in Ireland is part of a broader initiative to hire 1400 cloud salespersons in Europe, the Middle East and Africa (EMEA), with a focus on Amsterdam, Cairo, Dubai, Malaga (Spain) and Prague. The decision to hire 450 of the 1400 hires in Dublin underscores Oracle’s understanding of Dublin as an emerging technology hub bursting with organizations interested in transitioning to the cloud and the attendant talent required to execute the cloud transformation. By hiring 450 sales professionals in Dublin, Oracle brings the total count of its employees in Dublin to over 1800. Meanwhile, the broader decision to hire 1400 cloud sales professionals in the EMEA region illustrates the global quality of the cloud computing revolution and the corresponding intensity of Oracle’s interest in defining and shaping the global transition to the cloud in Europe, the Middle East and Africa.

Understanding The Significance Of Oracle’s Acquisition Of Datalogix

In late December, Oracle announced its intention to acquire digital marketing leader Datalogix. Datalogix specializes in understanding the relationship between digital marketing and offline purchases by leveraging its partnerships with over 1500 data partners who provide data about the purchasing patterns of roughly 110 million households. Headquartered in Westminister, CO, Datalogix boasts 650 customers including “82 of the top 100 US advertisers” such as Ford, Kraft, Facebook and Twitter. Datalogix aggregates data from its customers to enable digital marketers to personalize content to consumers across a variety of online channels. By acquiring Datalogix and integrating it into the Oracle Cloud, Oracle hopes to obtain an even more comprehensive picture about the online and offline activities of consumers that it can subsequently sell to advertisers and interested parties as illustrated below:

The graphic above illustrates how the acquisition of Datalogix complements Oracle’s larger data as a service platform. Datalogix provides the feather in Oracle’s cap with respect to cloud-based digital marketing by enhancing the data management capabilities of its 2014 acquisition BlueKai as well as the marketing automation functionality of its acquisitions of Eloqua and Responsys in 2012 and 2013 respectively. The acquisition of Datalogix augments Oracle’s analytics capabilities regarding offline and online consumer behavior and enables it to deliver an offering that allows customers to target, personalize and measure the results of marketing campaigns as noted above. Importantly, Datalogix positions Oracle to provide advertisers with the holy grail of data-driven marketing in the form of a master consumer identifier that maps to daily transactional data about brick and mortar consumer purchases as well as online social behavior such as social media-related actions and purchasing activities. In terms of its larger cloud strategy, the Datalogix acquisition catapults Oracle’s positioning within the cloud-based marketing space and gives it access to a trove of data that it can leverage for other products as well. All told, Oracle’s acquisition of Datalogix represents the icing on the cake for Oracle’s marketing-related acquisitions and a key addition to the Oracle Cloud as it gears up to continue asserting its presence in the market for cloud computing products and services.