AMZN Amazon.com Inc

By Jay Greene 

SAN FRANCISCO -- Oracle Corp. co-founder Larry Ellison brashly predicted Sunday night that the software giant will provide stiff competition to Amazon.com Inc. in providing computing power and storage in the cloud.

It is a market where Oracle barely registers now.

Mr. Ellison, the executive chairman and chief technology officer of the Redwood City, Calif., company, said Oracle's latest technology in the market, known as infrastructure as a service, is faster and cheaper than Amazon's technology.

"Amazon's lead is over. Amazon is going to have serious competition going forward," Mr. Ellison said during his Sunday night keynote speech at Oracle OpenWorld, the company's annual conference for developers, partners and customers in San Francisco. "We now have a tech advantage over Amazon in infrastructure as a service."

An Amazon spokeswoman declined to comment.

But Amazon, which pioneered the market a decade ago, dwarfs rivals. Earlier this year, Morgan Stanley estimated that Amazon Web Services generated $7.9 billion in sales last year, nearly eight times as much as Microsoft Corp.'s Azure, the second largest infrastructure-as-a-service player. Alphabet Inc.'s Google Cloud Platform registered third, at about one-sixteenth the size of Amazon's business, Morgan Stanley estimated.

When Mr. Ellison hinted at the infrastructure push and challenge to Amazon during the company's fiscal first-quarter earnings conference call Thursday, analysts were skeptical. Deutsche Bank analyst Karl Keirstead wrote in a report Friday, "We don't believe [Oracle's infrastructure-as-a-service offering] will be competitive anytime soon." Stifel Nicolaus & Co. analyst Brad Reback noted Oracle's "limited" success in the market in a Friday research report, adding that the firm is in "a wait-and-see mode with respect to the level of success" of the new service.

Oracle is trying to pivot from a seller of software licenses, a lucrative business that is shrinking for the company, to web-based, subscription services. Its cloud-based business applications, known as software as a service, are growing quickly, as are its web-based tools to program and manage apps and analyze data, called platform as a service.

But as more companies shift their operations to the cloud, the infrastructure-as-a-service market is crucial for Oracle. That is because moving to the cloud puts much of a company's computing operations in play.

And Amazon is aggressively making a bid for that business. Earlier this year, the company introduced new technology to make it easy for customers to move data to its data centers with AWS Database Migration Service. It was a direct threat to Oracle.

Perhaps the biggest obstacle to Oracle's challenge to Amazon is building the massive, and expensive, data centers around the world that are required to handle global customers' computing needs. Amazon has spent billions of dollars building those operations. Mr. Ellison didn't say how many data centers Oracle has, or how much the company plans to spend to build its rival business.

It is clear that Mr. Ellison expects Oracle to build its infrastructure business with its existing customers. They want to ease into cloud computing, taking their time to transition away from running data on their own servers. Oracle has developed technology to let customers make that move "with the click of a button," Mr. Ellison said.

"There is going to be a 10-year period of coexistence where you have data centers [run by customers] and applications in the cloud," Mr. Ellison said. "It's very important that those things coexist gracefully."

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

September 18, 2016 23:55 ET (03:55 GMT)

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