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Larry Ellison takes cloud fight to Jeff Bezos

Oracle CEO Larry Ellison.
Getty Images
Oracle CEO Larry Ellison.

Oracle founder Larry Ellison has convinced himself — if not investors — that he's won the cloud war against Salesforce.com's Marc Benioff.

Now it's on to Amazon.com and Jeff Bezos.

"We handle the Oracle database much better than Amazon does," Ellison, Oracle's executive chairman, said on Thursday during the software company's fourth-quarter earnings call. "They run Oracle databases, but we do a much better job. We run it faster, more reliably, more securely."

Ellison is going directly after Amazon Web Services, which has built the dominant cloud infrastructure business by enabling corporations to move storage and massive workloads out of their own data centers and into Amazon's. Oracle wants to house that data itself even though Amazon has a major head start and a wide selection of additional technologies for customers to access.

Oracle's cloud is growing. The company said total cloud revenue jumped 49 percent to $859 million, even as total sales fell 1 percent to $10.59 billion.

Oracle's cloud infrastructure business increased 5 percent to $169 million. That's a far cry from the $2.57 billion Amazon reported in AWS revenue in the latest quarter. Salesforce just announced plans to spend $400 million on AWS for bolstering its cloud.

Furthermore, Microsoft and Google are winning bigger deals in infrastructure. Add to that IBM, and the four leading players account for 53 percent of the market, according to Synergy Research Group.

Analysts aren't convinced that Oracle can make much of a dent.

"Fundamentally, we are concerned in the longer term about the impact on Oracle of competition from cloud platforms such as Amazon Web Services, Microsoft Azure and Google Cloud Platform," wrote Patrick Walravens, an analyst at JMP Securities, in a June 13 report. He has the equivalent of a sell rating on the stock.

Brent Thill, an analyst at UBS, said his group met 26 software companies last week and 90 percent of them are using AWS or are in the process of moving there.

Oracle shares rose 2 percent in extended trading on Thursday to $39.40. Revenue topped the average analyst estimate of $10.47 billion, according to Thomson Reuters.

Up to this point, investors have been dumping Oracle shares in favor of Amazon and Salesforce. In the past 12 months, Oracle has dropped 13 percent, while Amazon has surged 68 percent and Salesforce has gained 11 percent. Workday, a provider of cloud software for human resources and finance, is up 0.4 percent.

Still, Ellison says Oracle has a "fighting chance" to be the first software-as-a-service (SaaS) company to $10 billion in revenue, which would mean beating Salesforce. Oracle co-CEO Safra Catz said on the call that based on a 64 percent increase in deferred revenue and 38 percent jump in billings, "we are now growing faster than both Salesforce and Workday in every way."

Thill, who has a buy rating on Oracle shares, isn't buying the argument. Salesforce, the leader in SaaS, is expected to generate revenue this year of well over $8 billion and says it has a contract backlog of $11 billion.

"In SaaS you take that revenue over time, so reported revenue is not the leading indicator of health," Thill, who also recommends buying Salesforce shares, said in an email. In bookings, the more important metric, Salesforce is "well ahead," he said.