Oracle has for the past few years counted any on premise hardware (Sun, Exa) that was financed as cloud. Using terms such as RTU, right to use, they convince themselves that since a lease is like a subscription and a subscription is like a cloud then leading hardware must be cloud. They have also done the same with embedded OCS deals where a customer leases the hardware, OCS is included and all is counted as cloud.
I'm no Arthur Andersen, but this can't be right.
IBM, Oracle, and Microsoft have been adding cloud credits to on premise license renewals for years. The credits get recognized as revenue when they are consumed ... or when the credits expire without consumption. This should be illegal but probably isn't. There is no more a lawyered up company than Oracle. If the credits expire without consumption, it gets reported as cloud revenue, which misleads investors into thinking that an unhealthy business is healthy. Oracle can't keep doing this anymore as customers are less willing to add cloud credits if they did not consume them at their last renewal. Therefore, MH and SC are no longer reporting cloud revenue. Microsoft does a better job at getting customers to consume the credits, but frankly, their reported cloud revenue should be viewed through a skeptical lens. Yes, all three companies also report hosted hardware as cloud revenue. Microsoft is actually sticking Cray supercomputers in Azure. This is actually real revenue (customers are buying or leasing hardware) but is not "cloud" by any reasonable definition.
“Ask Ernst & Young” will become a hot topic in the near future....
You don’t understand, cloud is whatever the 3 stooges decide is cloud. What were you thinking? Letting the industry definition of cloud - somebody else’s computer — define oracle’s definition is just so narrow minded. Remember, God knows he’s not LE, the reveres doesn’t necessarily hold true.
"Not right, but probably not illegal as I'm not certain that there is legal financial definition for cloud sales."
I strongly suspect that there is no such legal definition. I seem to recall Microsoft commercials touting what was little more than off prem shared storage as "the cloud". Remember those ads where people would be working in cafes and sharing their project data with remote colleagues?
Now Wall St. has it's own definitions of what is "the cloud", but they certainly aren't legally binding. Wall St. and the SEC are more concerned about fraud a la Enron and WorldCom, hence SarbOx. As long as ORCL profits hold up, its price won't tank. It won't do an Amazon or Google either, because as has been pointed out in this blog, ORCL is a value stock, not a growth stock. Which means that LE is going to be left behind in the billionaires club.
Perhaps those who wish for ORCL to collapse and fire everyone (including oldsters who will have a hard time finding another job) will have to be content knowing that LE will lay in his deathbed someday, fretting about how other tech billionaires have net worths an order of magnitude bigger than his as he leaves this mortal coil.
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Still the analysts should be ashamed that they didn't dig deeper into the composition of the cloud revenues.
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That's exactly my feeling.
Many stock Analysts should be ashamed about how they do their job.
What do you think the "cloud machine" is? or "cloud @ customer."
Other companies are doing it to. You buy it in a "cloud" model and even if it's HW in some data center, it's a subscription and counts as "cloud" revenue, yes?
ask Ernst and Young...haha
Not right, but probably not illegal as I'm not certain that there is legal financial definition for cloud sales. Still the analysts should be ashamed that they didn't dig deeper into the composition of the cloud revenues.