Oracle (NASDAQ:ORCL), the leader in relational databases, made a strategic decision in the last decade that effected Oracle stock. It would fight open source and extract maximum monopoly rents from its dominance, buying its application providers and pushing up prices.
The acquisition spree culminated in the 2010 purchase of Sun Microsystems and a long effort to turn what had been open source software into proprietary software.
Through this decade Oracle has won some major battles, but it has lost the war. Companies that embraced open source, and the cloud computing technology built with it, have become giants.
Meanwhile Oracle’s market cap has fallen behind those of rivals like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon.Com (NASDAQ:AMZN), and (perhaps most galling of all) Facebook (NASDAQ:FB).
Oracle has finally begun investing in its own data centers, insisting it, too, is a “cloud” player. But is it?
Oracle Stock and the Cloud
The Cloud Czars have a combined market cap of $4 trillion. Oracle’s market cap is still under $200 billion.
Oracle chairman Larry Ellison, 74, who has a portrait somewhere growing old but still looks like an Anonymous Guy Fawkes mask, claimed another earnings beat in June, but analysts quickly noticed Oracle was no longer breaking out its cloud numbers in its reporting and the stock fell.
Since then, former salesmen have blown the whistle on Oracle’s cloud claims, and a pension fund has sued the company, along with several officers, attacking its sales tactics. The plaintiff’s bar representing investors is circling like vultures over roadkill.
Ellison, meanwhile, has made a Trumpian turn, picking a fight with Amazon over its continuing use of Oracle technology. The fact is Amazon is getting away from Oracle as fast as it can. This comes just months after Oracle beat Alphabet in court over its use of Java, once an open source technology, in building Google’s Android operating system.
Oracle is punching up, but it is increasingly unable to hurt its opponents.
Oracle’s Cloud ‘Solution’
I’ve been following Oracle throughout the decade, warning about its strategy of seeking short-term profit at the expense of customers, telling investors to avoid the stock for over five years.
Oracle claimed to be in cloud for years before building data centers, and those data centers aren’t built around customer needs but Oracle’s. If nothing else I’ve been consistent.
Oracle has been building data centers recently, claiming to be a cloud company, because customers are finally onto its tactics of fear, uncertainty and doubt and, like Amazon, they are abandoning its expensive technology as quickly as they can.
Open source is the way to build a cloud because open source cuts cost. Clouds, built with open source, are effective because they cut costs. Getting more for less money is what clouds are all about. For Oracle, however, more has always cost more.
The Bottom Line on Oracle Stock
The Oracle story is a tragic one, but it’s a choice management made with its eyes wide open.
Any tech company that prioritizes its own needs for profit over the desires of customers to cut costs is going to face the same problem as Oracle stock today.
The only thing that’s amazing about this story is that Oracle got away with this for so long, using every weapon at a modern corporation’s disposal to frustrate necessary change.
As they say in other contexts, time’s up.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Romantic Detective Finds Her Family, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT and AMZN.