Oracle Headquarters Redwood Shores (Photo credit: Wikipedia)
Oracle will announce third quarter earnings later today. Tech's great consolidator needs a comeback. The company's last quarter was a miss with earnings and revenue growth falling below Wall Street estimates. Big deals were having to go through greater approvals and some weren't closed as soon as expected, said Oracle's Safra Catz. There was turmoil in Europe, leaving everyone feeling uneasy.
This all seemed plausible and fine, but became hard to reconcile when Salesforce later announced a 38% jump in sales and big wins from rivals, including snagging Hewlett-Packard from Oracle (for sales and social software).
Salesforce is by no means an apples-to-apples comparison with Oracle. It is not even a tenth Oracle's size in estimated 2013 revenues and it sells only software. Oracle's hardware business alone is twice the size of Salesforce's total revenues. And yet, the two firms are increasingly selling into the same customers who are deciding between maintaining or improving legacy systems or switching to newer cloud-software offerings.
Patrick Walravens with JMP Securities has previously suggested the move to cloud computing is starting to hurt Oracle. He has a report out this morning maintaining his "market perform" rating on the stock (which some might translate as a sell). His channel checks on the quarter came in evenly split between positive and negative signals. He points out that the bar is high for Oracle. Not only are investors looking for a break from last quarter's slump, the company also has a tough comparison to beat. Last year's quarter saw new license revenue up 29% from the past year.
One trend Walravens says is clear and perhaps ominous is around salespeople. According to Walravens, Oracle is experiencing high turnover and seeing experienced sales reps leaving to join smaller, faster-growing players including the soon-to-IPO Workday, social site Jive, Salesforce.com, Box and Marketo, among others. If true, this is highly disruptive even to a company as vast as Oracle.
When I profiled Lars Dalgaard a few weeks ago he boasted that he is successfully poaching competitors' sales reps. He now is selling them the growth he built in SuccessFactors matched with the heft, resources, and job security of a large incumbent in SAP.
Oracle, of course, could be doing the same. It acquired RightNow Technologies before SAP acquired SuccessFactors. Then it bought another Web software firm, Taleo. Oracle President Mark Hurd was quick to point out in December that the company had added 1,700 "sales resources" since June. So perhaps Oracle is poaching just like the others, and this is simply the inevitable sales shuffle that comes with a technology shift.
Another item of news Walravens says to watch for: Exadata and Exalogic sales. These machines enable Larry Ellison's version of cloud computing where his applications (as well as others) run atop Oracle hardware. Ellison has set very clear goals for these two newer products. In the earnings last quarter he said:
This past Q2, Oracle sold over 200 Exadata and Exalogic engineered systems. In Q3, we plan to sell over 300 Exadata and Exalogic engineered systems. In Q4, we plan to sell over 400 Exadata and Exalogic engineered systems. That would make our annualized Q4 engineered system sales approximately $1 billion.
