Ellison’s healthcare obsession poses risks for Oracle

analysis When Oracle disappoints the market with last week’s earnings results, CTO and founder Larry Ellison touted a healthcare-based growth plan that’s not without its flaws.

Big Red’s stock price fell 4% after the report. Q3 settlementincreased revenue by 18% year-over-year to reach $12.39 billion.

Markets expecting $12.42 billion in revenue were disappointed, despite impressive growth for a company of Oracle’s size.

Responding to calls from investors, Ellison played a major role in expanding into the healthcare market. The company acquired medical software specialist Cerner for $28.3 billion.closed in June last year.

Ellison said: “While we are pleased with the initial success of the Cerner business, we expect new healthcare contract signings to accelerate over the next few quarters.” Records.

The list includes the Veterans Administration (VA), which Ellison said has installed its integrated electronic health record system at 19 additional sites. It is unclear when he mentioned VA Website Records Only 4 new implementations in 2022.

It probably wasn’t a project to brag about. That’s because in December, VA announced that he would halt all planned implementations of the $16 billion plan. Approved before Oracle acquired Cerner. Works great for veterans and veteran healthcare workers.

The Department of Veterans Affairs directs a $377 billion budget and operates 171 medical centers to provide healthcare to nearly nine million veterans and their families. Last year, a Senate committee heard how the Oracle Cerner electronic health record system was implemented. harmed nearly 150 patients Mann Groundstaff VA Medical Center in Spokane, Washington. At the hearing, Oracle said it had already fixed some issues and was working with hospitals to improve their systems as they migrated to the cloud platform.

But last month, Republican Mike Bost, chairman of the House Committee on Veterans Affairs, told the Department of Veterans Affairs and Oracle Thurner to “demonstrate significant improvements to the EHR system before installing it in additional medical centers.” ‘ has introduced a bill requiring that He threatened to end the deal.

register We have reached out to Oracle for comment.

Ellison also said Oracle was “bidding for a huge contract for the NHS”, a British health service with a budget that runs into the hundreds of billions of dollars. Software Giant Reports Bid for Federated Data Platforma £480m project for England’s health services, has already been delayed twice.

The cloud is another area Oracle believes is the best bet for growth. According to its latest quarterly results, Cloud Infrastructure revenue was $1.2 billion, up 55% year-over-year, and Cloud Applications (SaaS) revenue was $2.9 billion, up 42%.

but The entire cloud infrastructure market is worth around $65 billion per quarterAccording to Canalys figures, it is growing at about 23%, with Oracle’s revenue accounting for about 2% of the market, significantly ahead of major Amazon Web Services, Microsoft, and Google, which together account for about 63% of the market. I am falling behind.

Holger Mueller, vice president and principal analyst at Constellation Research, said Oracle’s plan is to provide the cloud for the Oracle Database with its applications and many other workloads. “That’s the ‘evil’ world domination plan. The question is when and how will Oracle encourage these customers to migrate to his OCI? But they’re going to Google Cloud. , so it’s not that bad for Oracle.”

In managing the move to the cloud, Oracle must contend with declining profitability. Margins are lower than the profitable support contracts that come with on-premises software. Nonetheless, investors see the cloud as a necessary future direction, at least as one that offers predictable returns.

“Oracle, like other technology vendors, may have been a little slow in pushing for cost reductions, but it will optimize its cost base in the next quarter,” Mueller predicts. .

Meanwhile, Ellison said Oracle’s big focus on patient record software is pushing HR and finance software into the same space.

The key here is securing the long-term footprint of Oracle databases and cloud infrastructure, not growth, even though the market is growing. “Oracle wants to grow its share with his move to OCI, and that’s plenty of growth. Basically, Cerner and the healthcare market have given Oracle a decade of solid growth. is working well and no competitors show up,” Müller said. ®

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