Oracle Corporation ($59.9|0.35%), the infamous database company that keeps surprising the world with its outspoken CEO and ore recently, the acquisition of TikTok, a Chinese social networking service that has gained tremendous popularity since its inception four years ago. With ongoing battles with its customers and delayed entry to the cloud computing business, will the company manage to readjust itself to the new realities of the tech world?
Covid pandemic affected most of the companies around the world. Some came out as winners, while others continue to struggle with no positive prospects ahead. Oracle, on the other hand, was mostly unaffected. However, it has also failed to gain momentum, as some other technology company managed to do. Three months ended August 31, 2020, the company recorded the payments of $9.367 billion vs $9.218 Billion same period last year.
Category breakdown shows that hardware sales slightly declined ($814 Million in 2019 vs $815 in 2020). Services revenue was reduced by $60 million, from $786 to $720. Revenue from Cloud license and on-premises licences grew by 9% from $812 million to $886 million.
The company has been late to join the cloud computing race and has been lagging market leaders, such as Amazon or Microsoft ever since. Oracle’s reporting of revenues isn’t transparent enough, as it doesn’t fully break down the income from its largest part of the business- on-premises database solutions and much smaller division- cloud services.
Oracle always had a reputation for its heavy-handed sales tactics and even heavier handling of its existing customers, where complex licence agreements are often used to extract additional revenue. The standings are unlikely to change any time soon, as even the CEO, Larry Ellison, openly mocks his largest clients for their attempts to move away from Oracle’s database solutions.
Poor relationships with clients don’t come without consequences. While Oracle’s database solutions are indeed compelling and a lot of critical infrastructures is built on it, some companies make it their mission to break away from Oracle.
It’s far from easy, however. Database migrations are expensive, risky, and ultimately must be worth it at the end of the journey. Until recently, Oracle hasn’t had any significant competitors in its class. However, the rapid rise of cloud computing and shift from on-premises solutions have changed the technological landscape Oracle operates in.
The company is most likely will continue seeing some growth in its CRM and Cloud solution categories. However longer-term prospects aren’t that bright. While slowly, even its largest clients continue to migrate to the cloud and often choose anything but Oracle’s products.
Recent Tik Tok deal raises more questions than answers it could provide. The company has almost no experience developing or even managing social media platforms, where the industry is paved with corpses of hundreds of failed companies because the management was unable to understand what the customers need or want.
The company’s prospects don’t look as bright as its CEO often likes to paint. It still has an extremely steep mountain to climb if it at least wants to catch up with Amazon, Microsoft, and Google on cloud computing. The recent TikTok is also a huge battle and yet to be seen how the company will manage it.
Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.