Oracle (NASDAQ:ORCL) founder and CEO, Larry Ellison, loves a fight, and that’s been a huge driver in creating one of the world’s largest software companies.
What does Ellison want to conquer next? He’s now looking to dominate the so-called Internet cloud. This is much different from traditional software, as it uses the Internet to deliver software via recurring subscriptions. In other words, it could be a big threat to Oracle – as well as other big operators like IBM (NYSE:IBM), Hewlett-Packard (NYSE:HPQ), SAP (NYSE:SAP) and Microsoft (Nasdaq:MSFT). Their systems definitely look like expensive anachronisms.
So far, the leader in the cloud is Salesforce.com (NYSE:CRM), which sells sales automation software. And the company continues to grow like a weed. In the latest quarter, revenue increased 38%, and the company has about 104,000 customers, up 26% over the past year.
Keep in mind that Salesforce.com’s CEO Marc Benioff worked for Ellison back in the 1990s; he learned a lot from the master.
But now it looks like the two have become enemies in a brewing war. Just a few weeks ago, Ellison cancelled Benioff’s keynote at the OpenWorld conference. Of course, it caused a huge stir and may have been the warning shot of the cloud war.
No doubt, Ellison is following things up with something he knows quite well: acquisitions. To this end, he agreed to shell out $1.43 billion for RightNow Technologies (Nasdaq:RNOW), which sells cloud-based customer services.
It’s a smart deal. Founded back in 1997, RightNow has an extensive technology infrastructure that Oracle can leverage across its massive customer base. Plus, the company also has invested in social media and mobile, which are becoming more critical for businesses.
Yet Ellison will likely continue to buy more cloud operators. Perhaps the most obvious is NetSuite (NYSE:N), which sells enterprise resource planning services for human resources, inventory and financials. In fact, Ellison has a big advantage since he already personally owns or controls over half of NetSuite’s outstanding shares.
Over the years, Ellison has proven to be a savvy dealmaker, having purchased 60 companies since 2005. This has helped to keep the company’s growth robust. Over the past 5 years, Oracle’s average annual return for shareholders was 12.1%.
Oracle has already benefited nicely from the cloud. The company’s databases and server software are critical for the technology’s back-end infrastructure.
But for Ellison, this isn’t enough. He is now willing to make the investments to be dominant with business applications. No doubt, this can be a big driver for growth. According to Gartner, the cloud market for business is expected to go to $21.3 billion from $10 billion in 2010. This is the kind of opportunity that can certainly move the needle for Oracle.
Tom Taulli runs the InvestorPlace blog “IPO Playbook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter @ttaulli. As of this writing, he did not own a positioning any of the stocks named here.
