Lost amid all of the Alibaba (BABA) hoopla were two astonishing moves made last night by two different companies: The departure of Larry Ellison from the chief executive job of Oracle (ORCL), the company he founded, and SAP's (SAP) purchase of Concur Technologies (CNQR) for $129 per share, a whopping 24% premium to where the stock was trading yesterday.
In many ways, these two very different changes are related, at least metaphorically, to each other. Oracle, represents the twilight of the traditional non-cloud way of computing that Ellison pioneered. Meanwhile, the SAP acquisition of Concur embraces the new world of cloud computing, albeit at a very steep $7.4 billion price tag. Concur, a company whose stock I have embraced endlessly, "owns" the travel and entertainment silo for cloud computing.
Ellison is a great man who, one could argue, made Oracle into the information technology hub of the 1990s and the first decade of the millennium. It was the company you brought in to link all of your internal systems together in one nifty package. Oracle helped make obsolete the traditional IBM (IBM)-style big iron by embracing what's known at the client-server technology -- having your desk top linked to bigger equipment in house. Everything sits on a very proprietary, internal system that you pay Oracle a huge amount to license, so it's basically is an endless annuity stream for the database giant.
SAP offers a similar system of enterprise software that takes care of many of the same functions as Oracle and they often go head-to-head with each other.
Suddenly, out of nowhere, along comes Salesforce.com (CRM) with a very disruptive, untethered platform that stores your data not on the expensive hardware that Oracle has you wedded to, but on the cloud itself. You bring in Salesforce.com and you bring in a cheaper and better system that has become much beloved. It is the fastest technology company ever to get to $5 billion in sales -- as it was to get to $4 billion and $3 billion and $2 billion before that.
And yet Ellison didn't see it coming. Instead, just when Salesforce.com was really starting to take off in 2010, Ellison went the other way and paid up for big hardware, buying Sun Microsystems for $5.6 billion.
That acquisition, which the company has defended year after year, has been a disaster. It was one of the chief reasons why the quarter Oracle announced last night at the same time as Ellison's retirement from the CEO job, was very disappointing and is causing the stock to get hammered today.
It is true that Oracle has its own fast-growing cloud initiative, which is the only real bright spot I saw in the quarter. As Ellison said last night in a humbling admission on the call, "So we're focused on becoming No. 1 in the cloud -- being bigger than Salesforce.com in the cloud."
To which I say, ouch and good luck. Oracle is now a lucrative but slow growing legacy system company while Salesforce keeps winning business that at one time would have gone to this old-line information technology company. If anything, I could argue that the gulf is getting wider, not narrower, between the two.
Now, how about that SAP competitor? It, too, has to catch up to Salesforce.com and I think buying Concur, which has the best one-stop cloud software for everything related to travel and leisure, is a great way to do it.
I have talked to Steve Singh, the CEO of Concur, many times and I recognize that this company has become unchallengeable -- it is that far ahead of everyone. It is the type of company that Oracle should have bought instead of the continual buying back of stock, which hasn't done all that much for shareholders.
Now, I have a lot of respect for the two people taking over the CEO job for Ellison: Mark Hurd, who has been doing a lot of the day-to-day heavy lifting for Oracle since he came to the company four years ago, and Safra Catz, who is a real financial whiz. Ellison is staying on as executive chairman and chief technology officer but it is now the Hurd-Catz show.
But let me be real upfront: It was time for a change. Oracle has been an inconsistent start-stop performer for ages. It has been trying to play catch-up with Salesforce.com for ages but failed to do so.
Maybe with this management shift, it can happen faster. But the simple truth is that Ellison, the vicious competitor who crushed the old guard on the way to making Oracle a tech powerhouse, got beaten by a younger version of Ellison himself: Marc Benioff, the founder and CEO of Salesforce.com. Let's just hope it's not too late for Oracle to stay competitive in the new world it ignored for way too long, which has now become the standard in the information technology world.