Oracle Corp Japan
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Oracle Corp Japan
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[Audio Gap]
Thank you, Nishio-san. Good afternoon, everyone. I hope this year -- I hope you're all safe and including your families in these difficult times. We -- just like most of you, a lot of you, I think, I'm also working from home for a long time, and these are challenging circumstances for everyone. And we hope to overcome this as soon as possible.
We -- as a company, we had a good quarter for Oracle. We see good demand for our Cloud products. We see good demand for our ERP -- especially in our ERP segment. It's picking up, including NetSuite. Overall, things are challenging, very challenging just like any other company, but we are in good shape to overcome these challenges for the year.
So having said that, let me quickly take you through the summary of the numbers for the quarter. Our revenue at JPY 47.629 billion is essentially flat, growing at 0.3%. And our operating income at JPY 14.536 billion is growing at 2%.
[Foreign Language]
Thank you. I'm sorry, I always forget that I have to wait for the interpreter, but I will try and be easy on my interpreter.
So I'll quickly talk about revenue breakdown by business segments. Our Cloud license and on-premise license for the quarter was JPY 8.137 billion, which is a decline of 13.2% year-over-year. As you can see, it was a challenging quarter with some of the small and medium enterprises, SME. In the SME market, especially, we saw a little slower uptake of our business, which we hope to sort of get back as the pandemic sort of subsides. Our Cloud services and license support revenue at JPY 30.330 billion, grew 4.4%, as solid as ever year-over-year.
[Foreign Language]
On our Hardware systems revenue at JPY 4.003 billion, grew 1.4% for the quarter. And our Services business at JPY 5.157 billion, grew 0.6%, essentially flat, but continues to give us good margins.
[Foreign Language]
Now back to Page #1. As you can see from our operating income, we continue to deliver very good margins for the corporation. And I continue to hold my full year forecast guidance at 0% to 3% for my revenue and JPY 370 to JPY 385 for my EPS.
[Foreign Language]
So that's my summary. And with that, I open it up for questions.
[Foreign Language]
[Foreign Language]
[Interpreted] This is Kikuchi-san from SMBC Nikko. Two questions. First question is about license revenue. In the first quarter, you mentioned that SME market was particularly slow or weak, and you may not be able to project third quarter. But if -- second quarter, if the situation remains the same, then do you think that this slow or weak momentum will continue? And maybe it is already included in the plan, but my question is about the forecast regarding the license revenue in second quarter.
Thank you for your question. It is definitely a good question, which is -- which bothers us also. Having said that, we did plan for a weaker first half and a stronger second half in our planning process because that -- we saw that the pandemic would have some effect on our business.
[Foreign Language]
So we are watching our current situation for Q2. And I think, in Q2, the situation should improve. That's number one. Number two, we also see customers who are using this situation, the pandemic situation, to actually go for more digitalization. They are moving from legacy systems to being more digital because that's the way to survive in the future. Overall, as you have noted, we will just continue to hold our forecast for the full year. Maybe Q2, there will be a little bit effect of the pandemic, which continues, but we should be recovering soon.
[Foreign Language]
[Foreign Language]
[Interpreted] Okay. I understood very well. Moving on to my second question. Your Cloud service and license support, also this investment support remains to be firm. And recently, both in Japan as well as outside of Japan, the demand for IaaS, I-A-A-S, has been growing. I think that has been the trend. However, Oracle's growth is not that high. So -- and it seems like your license support, looking at previous year, second quarter, third quarter was very strong. And the fourth quarter, although not as much as second and third quarter, but still was high, and it's growing. So maybe the -- perhaps, the Cloud growth is rather weak. And so if you could give me the breakdown of the license support, the split between IaaS and PaaS, and what is the trend, that will be helpful.
Thank you. So we -- at the outset, I must say that we do not split our numbers because there's -- a lot of these numbers are interchangeable. But I can give you a flavor of our IaaS business and why we feel really good about it. We -- our IaaS business is essentially -- we have been selling database in this market for a very long time. So we have a huge database, on-premise installed base in the country.
[Foreign Language]
So we feel that this installed base that we have for our on-premise customers is going to move to our Infrastructure-as-a-Service. We have already started some of the activity, and we also track our consumption, IaaS consumption, on a -- not on a year-over-year basis, but also -- on a quarter-over-quarter basis. Our IaaS consumption grows in high double digits every quarter. Every quarter I mean quarter-over-quarter, not year-over-year.
[Foreign Language]
On top of that, we also have a lot of custom applications that we are starting to see that are beginning to move to Oracle on our Gen 2 technology.
[Foreign Language]
The biggest example of that is Nomura Research Institute, who's investing almost $20 million a year with us to move all of their finance applications to the Oracle Cloud infrastructure.
[Foreign Language]
So the way I see it, that we are ready for the market, we have a great product offering, and we have momentum on our side. And thirdly, we have our own installed base of customers. It's not -- unlike Amazon or Microsoft Azure where they have to go out into other installed bases. We have our own customers' installed base to move to Cloud.
[Foreign Language]
Thank you. I hope that answers your question.
[Foreign Language]
[Interpreted] So I understood that IaaS is growing and license support is growing. So is it correct to understand that PaaS is not growing? Or maybe it's negative year-on-year basis?
We don't break between IaaS and PaaS. So for us, PaaS and IaaS are the same line because these things are completely interchangeable. I don't have visibility to PaaS numbers anymore. I -- we only look at Infrastructure-as-a-Service, which includes PaaS.
[Foreign Language]
[Foreign Language]
[Interpreted] This is Tanaka from MUFJ Morgan Stanley. I have one question. I wonder -- you've explained that SME in your license business was rather slow due to pandemic. But my impression of Oracle with that, Oracle has been strong in enterprise market. And I understand maybe you do not disclose the breakdown, but at a ballpark level, can you give me an idea of the split between enterprise and SME market for you?
So our SMB business is primarily driven by our partners. We don't have feet on this. We don't have salespeople to touch each and every SMB customers. Our partners basically do dominate that business for us, and hence, so we -- because of the pandemic, a lot of the local SIs were also slow and the demand from the SMBs were also slow. That was leading to this slight weakness in the SMB market.
SMB market still constitutes a fair percentage. I will not break down the percentage, but it constitutes a fair share of our business.
Now your question on the enterprise business, right? If you look at Q4 last year, we had a solid license number, and that was coming on top of FY '19 Q4, which was even -- which was also very big.
[Foreign Language]
So I basically look at this quarter more. Of course, there is weakness because of pandemic, but I also look at this quarter as a resting quarter or a breathing period for Oracle. If you look at historically, we have these ups and downs in the license business always. So this is just one of those quarters. There's -- I don't think I'm reading anything else into the license performance in this quarter.
[Foreign Language]
[Foreign Language]. The first question to question is about advances by customers. It seems that there's a significant jump from May to August. What happened here? And how should we lead the implication to the future revenue?
[Foreign Language]
You know this is advances from customer. It's also -- it's a leading indicator for us, as you know, so the jump -- and it's also cyclical in nature. Some quarters, you will find it lower growth percentages, others you'll find it higher. But this is -- part of it is our advances for our Cloud bookings, and part of it is our advances for the license support. It's a combination of both of these things. We had a very good Q4, where, as you can see, we booked quite a bit of Cloud and also quite a bit of license business. So these advances are pertaining to that.
[Foreign Language]
[Foreign Language]
[Interpreted] You said Q4? I'm sorry.
Yes. Yes, yes.
[Interpreted] Is it not Q1? It was honest thing.
No. But the advances, actually, it's a timing difference of the invoicing. So the business is basically both booked in Q4 and Q1, but what you see is basically the timing difference on the invoicing. That's why these numbers looks like that.
[Foreign Language]
The second question is not about TikTok, but about the Zoom. So Zoom has a multiyear, multi-country license with Oracle. And in the case of Oracle U.S.A., it had seen a significant revenue increase Q-on-Q, particularly IaaS. How is it related to the Japanese business? Is there any benefit or no benefit in the Zoom usage level in Japan to Oracle Japan?
Good. They are completely driven by the -- centrally driven by Oracle Corporation. So they have a global contract. So we do not get any credit for Zoom's bookings.
I see. Okay. Understood.
[Foreign Language]
However, just let me add one more sentence to it. Zoom is a great reference for Oracle, and it's a big success story. It's a very big brand. So we definitely think that in Oracle Japan, we can actually use that, that win -- use the Zoom reference to talk to our Japanese customers, a lot of independent software vendors who are looking for -- to move their business to the Cloud. Oracle offers a great opportunity. So it's -- it may -- the contract by itself may not help us, but it will help our business in Japan.
[Foreign Language]
Thank you very much. That's it from me. Thanks.
[Foreign Language]
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]