Oracle's In For A Bad Ride After Near-Miss On Revenue
Either way you put it, Oracle Corporation (NYSE: ORCL) has had quite a busy week. On December 15, the company issued its second-quarter results. But although results were credible, its share price plummeted by 3.2 percent after a near-miss on revenue results.
Second-Quarter Results
Revenues increased 1 percent and amounted to $9.61 billion resulting in earnings per share of $0.69. GAAP operating income managed to increase 3% to $3.2billion. This clear image portrays that it will be hard to achieve the yearly targets. When looking at year-on-year basis, revenue increased half a percent. Comparing to a year ago, cloud service in particular increased 3 percent and contributed $6.81 billion.
But cloud license dropped 7 percent year-on-year as well as hardware revenue – 2 percent. The bottom line, however, is that profit increased to $2.31 billion.
Competitors
Oracle's CEO has opted for quite a risky approach of trashing the competition in order to hide his own company's length and quite slow transition to the cloud world. A blend of truth and half-truth, with a hint of fantasies can be entertaining for the market. But, this external focus has become a rather outdated tactics as competitors focus on an internal perspective in order to dazzle and enchant their customers. And at the end of the day, this is the only thing that can truly delight customers.
But besides the fact that Ellison would like SAP (NYSE: SAP) and Workday (NASDAQ: WDAY) to be bumbling at best and incompetent at worst, both have higher growth rates than Oracle in the cloud segment. So Oracle's success has a lot of ‘if's' and is greatly dependent on its competitors ‘freezing' their progress. And despite the fact that Larry Ellison is surely among the greatest strategies of our time, his trashing tactics cannot freeze the market until Oracle finally improves and catches up.
But both SAP and Oracle are on a quest to be the world's number one app provider. However, when it comes to CRM, both claim to be proudly following Salesforce (NYSE: CRM) at second place. And not to forget that HCM aside, that they both face pressures from SaaS leader Workday. Recently, Workday ramped up both marketing and product management with significant reorganizational changes so no one is taking their time. And everyone are centering their efforts around product enhancements and not wasting precious time on words.
Outlook
Overall, it was indeed a busy week. Besides disappointing Wall Street, Oracle added Vishal Sikka to its board of directors and also moved its annual conference from San Francisco to ‘less expensive' Las Vegas. But the fact remains that the company didn't undergo any major changes recently when it comes to its future prospects.
It is important not to forget that the long-term prospects of the business are much more relevant than next year's earnings. But it is pretty clear that Oracle is expected to grow slower than its peers as 2019 was nothing short of a bumpy ride.
The database market is valued at around $68 billion but here's the bumpy part: most of the technology on that market is outdated for the cloud era. Oracle needs to start moving faster or it risks becoming outdated as well during these tense cloud wars.
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