Larry Ellison needs to rewrite Oracle's code

The software giant's second straight earnings disappointment shows its underlying problems aren't merely pesky bugs.

By Jonathan Berr Jun 21, 2013 12:30PM
File photo of Oracle Corp. headquarters in Redwood City, Calif. (© David Paul Morris/Bloomberg via Getty Images)Shares of Oracle (ORCL) are getting clobbered Friday, falling more than 8% in morning trading, after the software giant reported its second straight disappointing earnings Thursday. That's prompting some investors to wonder whether CEO Larry Ellison has failed to keep up with the latest technology trends.

Earnings rose to $3.81 billion, or 80 cents a share, up from $3.45 billion, or 69 cents a share, a year earlier. Revenue gained 0.3% to $10.95 billion. Excluding one-time items, profit was 87 cents per share. That profit matched analysts' estimates of 87 cents, but fell short of the $11.1 billion in revenue they were expecting. And Oracle's guidance for the current quarter was lackluster.

It also announced plans to switch its stock listing to the New York Stock Exchange from Nasdaq. But that has nothing to do with the stock's dive.

Rather, Ellison's problem in a nutshell is that businesses are finding an economical alternative to Oracle's bread-and-butter offerings. Many customers now prefer buying access to software that runs on someone else's network, also known as cloud computing, instead of installing on their own systems the large database and human resource applications that Oracle and others sell.

While Ellison has been acquiring cloud-computing companies to regain footing in the marketplace, this hasn't given Oracle's bottom line enough of a boost to satisfy investors. New software license sales and cloud subscriptions eked out a 1% gain in the latest quarter.

That prompted Ellison to promise "startling" new cloud partnerships that include rivals such as Microsoft (MSFT) and Salesforce.com (CRM). (Microsoft owns and publishes moneyNOW, an MSN Money site.) He wasn't more specific about such plans, and that's a problem.

Ellison, whose $96.1 million compensation makes him makes him the country's highest-paid CEO, knows better than most that talk is cheap. For years, the company has grown through acquisitions, and, with the exception of 2009's $7.4 billion deal for Sun Microsystems, they've worked out.

The billionaire with a fondness for sailing, fighter jets and private islands is either going to have to write more checks or figure out a way to get Oracle growing organically again. Either scenario will present plenty of challenges.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

 

More on moneyNOW

1Comment
Jun 21, 2013 3:54PM
avatar
Ridiculous pay without performance...give some back to the company and maybe the numbers will balance better.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The major averages finished the session on a modestly higher note, but not before heavy selling pressure sent the Nasdaq Composite (+0.3%) for a test of its 200-day moving average. The S&P 500, meanwhile, added 0.7% with all ten sectors posting gains.

Equities climbed at the open with the advance built on the relative strength of biotechnology and other momentum names. Despite the solid early gains in those areas, the market began fading from its high as multiple ... More

MSN MONEY'S