Regular readers know I am no fan of Oracle (NYSE:ORCL). Oracle stock has won some battles on behalf of proprietary software, but it is slowly losing the war. Even its Oracle Cloud, for which it had high hopes, lacks the scale and flexibility to compete.

This is reflected in its latest earnings report, for what it calls the first quarter of 2019, ending in August. Earnings were $2.3 billion, 57 cents per share fully diluted, and this represented 25% of revenues … a growth rate of 11%.

That would seem like good news for Oracle stock.

But the bad news was that total revenue was $9.2 billion, compared with $9.1 billion a year ago. Analysts had expected $9.3 billion in revenue, and ORCL stock fell 5%. 

ORCL Stock: Credibility Shot

Oracle has re-arranged how it reports numbers and stopped reporting cloud revenues separately in the May quarter. Its largest segment is now called “cloud services and license support,” but analysts aren’t fooled.

As I have pointed out for years, Oracle missed the move to cloud, actively resisting its open source components. This not only hurt Oracle, but every company attached to it.

ORCL’s decision to make the tools it won with Sun Microsystems de-facto proprietary could eventually win it $8.8 billion from Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) over copyright (the House of Google is appealing that to the Supreme Court) but it also caused developers to shun Oracle tools, and the company finally decided to kill its Solaris operating system last year, which like Linux, was based on Unix.

While Oracle stock’s market cap is up 45% over the last five years, the average Nasdaq stock is up 108%, and rival Microsoft (NASDAQ:MSFT) is up over 200%, thanks to its decision to go all-in on its Azure cloud system.

Slow Burn for Oracle Stock

Oracle is not yet broke. Far from it. ORCL had $6.7 billion in operating cash flow during the most recent quarter and reported $18.5 billion in cash was on its books at the end of August. Oracle pays shareholders 19 cents per share in dividends each quarter, and it bought back nearly $10 billion in stock during the most recent quarter.

But the company has made key strategic decisions it can’t take back. It is no longer part of the computing mainstream. Salesforce (NYSE:CRM), which was launched in 1999 to run Oracle database applications as a service, now has a market cap of $117 billion, against $195 billion for Oracle, and could easily pass it in the middle of next decade.

Oracle stock’s performance over the last year, in fact, is nearly identical to that of International Business Machines (NYSE:IBM), which has been flailing for decades. But at least IBM has a decent yield — 4.23%. Oracle doesn’t even have that. Its yield is 1.54%.

The Bottom Line on ORCL

It is amazing that Wall Street analysts have been so slow to catch on to this slow-motion train wreck. Some 16 of the 35 analysts following ORCL stock — nearly half — still have it on their buy lists, and only one is telling investors to sell it.

Oracle’s virtual stranglehold on enterprise database customers remains a powerful earnings driver, and many large companies remain dependent on Oracle databases. But many companies also remain dependent on mainframes. That doesn’t mean you want to invest in them, or ORCL stock.

I have been trying to explain what is wrong with Oracle stock since 2011 and I maintain today what I did then. “Oracle has been dismissing cloud, pretending to be cloud, selling what it calls cloud, and dancing around cloud.”

That remains the case, and Oracle shareholders are the worse for it.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in MSFT.