Aneel Bushri didn't mean to drop the bomb, the bomb of competition in the human capital space. His company, Workday (WDAY), had just delivered another excellent quarter. But there was no doubt that competition has cut into the ability to cut into big deals with huge price tags that have made this stock a popular favorite among so many cloud devotees.
That's why the last words on the conference call left such a bad taste in peoples' mouths and it is a main reason why the stock got hit. In answer to a question about "irrational pricing" by competitor Oracle (ORCL), and the "heated" competition in the space, Bushri replied: "I don't think it is any different in terms of their tactics in the first quarter than it has been in the previous quarters. I mean I'd say every quarter is an ebb and flow. I'd say right now Oracle has their act together better than SAP (SAP). SAP seems to be in a bit of disarray."
That's all well and good, and I am sure that it's better to have only one strong competitor than two. But I sure didn't want to hear that Oracle has its act together when I know from the Oracle side that they are doing everything they can to frustrate Workday, having not paid attention to Marc Benioff and his cloud efforts when salesforce.com (CRM) snuck up to being a $6 billion-soon-to-be-$7 billion in sales company.
Workday just crossed $1 billion.
Now, Workday was one of the few companies that rallied coming out of yesterday's miserable session for tech and so many other segments of the market.
It is incredibly highly valued, as it should be given that it wins so many head-to-head contests against SAP and Oracle for new business. But if Oracle's gotten its act together and it is being brutal on price rather than revenue growth, Workday is going to slow and the drop-off of SAP won't be as significant as it would normally be.
Oracle has told everyone and his brother that it is not going to let this human capital vertical or the payroll adjacency be taken away from it by upstart cloud companies.
I thought last night's weaker billings number and forecast slowdown, as strong as it would be for any other company, was a sign that Oracle means business. It is not going to let another salesforce.com swing into action.
That's bad news for Workday shareholders, even if the company does have both a superior product and an amazing sales pitch.
Oracle has the cash and the moxie to give business away if it wants to in this particular vertical. Workday has to hope that SAP's "disarray" gets worse and that Oracle relents to get back to the super high growth path it is on.
Otherwise, it is just on a high growth one, which is not good for a company with good cash flow but minuscule earnings and, some would say, a Tesla (TSLA) valuation for a cloud play, especially after salesforce.com shocked with a very profitable and fast growing quarter one week ago.