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Oracle to Charge Commercial Users of Java, Conducts Audits
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Oracle Corporation (ORCL - Free Report) is reportedly tightening up on the software audit front, with respect to the usage of Java Standard Edition (Java SE), a very popular version of Java readily available for download from Oracle’s official website.
Reportedly, the company has recruited 20 Java specialists to be part of the License Management Services (LMS) department, in order to take care of the software audits.
Software auditing is a practice implemented by many enterprise software companies to investigate clients, suspected of not paying for using the software.
Notably, International Business Machines Corporation (IBM - Free Report) , SAP SE (SAP - Free Report) and Microsoft (MSFT - Free Report) are some companies that have a well defined set of complex legal framework to ascertain how much a client should pay to use the software. The metrics used to derive the cost of the software typically includes the number of PCs running the software and the features of the software being used.
Why This Move?
Oracle reported revenues of $9.07 billion in the second-quarter of fiscal 2017, which missed the Zacks Consensus Estimate. Notably, the on-premises software revenues declined 3.7% to $6.13 billion. However, strong cloud revenues were able to offset the decline and posted a 2.9% growth, when taken together with on-premises revenues.
Although the company is making progress in making its customers switch to the cloud, it seems that it doesn’t want to leave any stone unturned to expand its shrinking software revenues.
Although Java is free to be used for personal purposes, not all versions of the platform are free. Especially, when it comes to installing the platform on multiple Windows-based PCs in an office, that requires the Microsoft Windows Installer Enterprise JRE to do the job, it no longer remains a free program and is chargeable.
What this Means for Oracle?
We note that Oracle acquired Sun Microsystems, the creator of Java in 2010. It has been six years and the company hasn’t been too aggressive about auditing the Java SE users.
With the company tightening its stance on the usage of the platform, revenues in the coming quarters could easily get a boost given the huge base of customers running the platform.
With an estimated 3 billion devices running on Java, the implications of the decision could be huge and will surely improve the top-line, going ahead.
Stock Performance Overview
Shares of Oracle have underperformed the broader Zacks Computer Software industry on a year-to-date basis. While the industry generated a return of 10.4%, the stock returned 6.5%.
The underperformance of the stock could be attributed to the ongoing transition from licensing to the cloud business model that is keeping margins under pressure at the moment. Moreover, litigation matters are also keeping the share prices under check.
Nevertheless, the ongoing momentum at SaaS and PaaS provides significant growth opportunity. The introduction of Generation2 IaaS data centers are expected to boost Oracle’s competitive prowess against Amazon Web Services and drive market share, going ahead.
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Oracle to Charge Commercial Users of Java, Conducts Audits
Oracle Corporation (ORCL - Free Report) is reportedly tightening up on the software audit front, with respect to the usage of Java Standard Edition (Java SE), a very popular version of Java readily available for download from Oracle’s official website.
Reportedly, the company has recruited 20 Java specialists to be part of the License Management Services (LMS) department, in order to take care of the software audits.
ORACLE CORP Price
ORACLE CORP Price | ORACLE CORP Quote
What is Software Auditing?
Software auditing is a practice implemented by many enterprise software companies to investigate clients, suspected of not paying for using the software.
Notably, International Business Machines Corporation (IBM - Free Report) , SAP SE (SAP - Free Report) and Microsoft (MSFT - Free Report) are some companies that have a well defined set of complex legal framework to ascertain how much a client should pay to use the software. The metrics used to derive the cost of the software typically includes the number of PCs running the software and the features of the software being used.
Why This Move?
Oracle reported revenues of $9.07 billion in the second-quarter of fiscal 2017, which missed the Zacks Consensus Estimate. Notably, the on-premises software revenues declined 3.7% to $6.13 billion. However, strong cloud revenues were able to offset the decline and posted a 2.9% growth, when taken together with on-premises revenues.
Although the company is making progress in making its customers switch to the cloud, it seems that it doesn’t want to leave any stone unturned to expand its shrinking software revenues.
Although Java is free to be used for personal purposes, not all versions of the platform are free. Especially, when it comes to installing the platform on multiple Windows-based PCs in an office, that requires the Microsoft Windows Installer Enterprise JRE to do the job, it no longer remains a free program and is chargeable.
What this Means for Oracle?
We note that Oracle acquired Sun Microsystems, the creator of Java in 2010. It has been six years and the company hasn’t been too aggressive about auditing the Java SE users.
With the company tightening its stance on the usage of the platform, revenues in the coming quarters could easily get a boost given the huge base of customers running the platform.
With an estimated 3 billion devices running on Java, the implications of the decision could be huge and will surely improve the top-line, going ahead.
Stock Performance Overview
Shares of Oracle have underperformed the broader Zacks Computer Software industry on a year-to-date basis. While the industry generated a return of 10.4%, the stock returned 6.5%.
The underperformance of the stock could be attributed to the ongoing transition from licensing to the cloud business model that is keeping margins under pressure at the moment. Moreover, litigation matters are also keeping the share prices under check.
Nevertheless, the ongoing momentum at SaaS and PaaS provides significant growth opportunity. The introduction of Generation2 IaaS data centers are expected to boost Oracle’s competitive prowess against Amazon Web Services and drive market share, going ahead.
Zacks Rank
At present, Oracle carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>