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.
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.
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The company has made at least 4 acquisitions in the space, and few people have paid any attention.
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