Oracle (ORCL) is not being shy about making an offensive against upstart cloud players that have eroded its market share in recent years.
Shares were rising on Thursday, largely on the idea that the company can go "back to the future" and regain a great deal of its formerly dominant market share, particularly in cloud enterprise resource management (ERP) and human capital management (HCM).
CEO Mark Hurd said that overall ERP and HCM annualized software-as-a-service revenue is "up in the high 20%" with Fusion cloud apps providing a significant boost to bookings and revenue.
Hurd specifically called out competitors like SAP SE (SAP) , Microsoft (MSFT) , Epicor (owned by KKR & Co. (KKR) ), Workday (WDAY) , and Infor as names that Oracle's good fortunes are stealing from.
As many of the companies continue to build out capabilities and migrate existing clients, Hurd said now is the time for the company to capitalize on dissatisfied customers. He took particular aim at SAP and its business-data platform, HANA.
"SAP is forcing older customers to a new platform by the beginning of 2025 that forces all their customers to move and all the changes -- not just the changes they've just made, but all the changes they made -- to the code has to be remade to the code," he said.
"What that means is, they have to roll up a big new bill to move to this thing... And it's a big damn bill and so the poor CIO or CFO, wherever this guy is, has to show up to the board and say to the board of directors, we've got a $500 million bill to move to HANA."
Hurd bet this would not be an easy conversation for executives, allowing Oracle to come in and take market share amidst the migration expense, carrying accounts that have long since left the Oracle ecosystem.
"Do we get calls from customers that we haven't ... talked to in 20 years? The answer is, Yes," he said. "When we sold to customers 15 years ago, they never really talked to us after that and vice versa because you're expected to stay with these ERP systems forever ... some percent of their base will move as a result of just [migration expense], because it's a lot of money for not getting much, real simple."
Workday is in a similar laggard position, given its granular focus on HCM, he said.
"When the ERP buyer and the HCM buyer are aligned and combined, they are really in a position with no chance, because they don't have much of a real financials product," he said. "I know they hype it and they talk about it and all that, but at the end of the day, they're just not competitive."
He forecast the financial cloud market share for Oracle could reach above 90% in coming years as it provides for a more fully integrated system.
Building Off the Database
Regardless of the competition in the cloud, the company's role in the software life-cycle could be an important downside protection as the debate about its position in market-share rankings persists.
CTO Larry Ellison noted that Salesforce.com (CRM) , a company founded by former Oracle employee Mark Benioff and co-run by former Oracle executive Keith Block, as well as many others, still rely on Oracle in some way.
"Everything that Salesforce.com runs pretty much is running on the Oracle database," Ellison told analysts. "Everything that SAP acquired to run in the cloud runs on the Oracle Database. Now, I know SAP says they are going to move, but they said that 6 years ago, haven't quite gotten there yet."
He added that the role Oracle plays for developers makes it integral in the software ecosystem, protecting it from full replacement.
Ellison explained that the company's ability to be a starting point for numerous entrepreneurs, students, and developers should allow the company to retain a sticky user base and offer potential for success stories to retain their services.
"We are encouraged by overall ecosystem growth as Oracle continues to provide customers with solutions regardless of where and how they choose to deploy them," Jefferies analyst John DiFucci said, endorsing Ellison's aims. "Buy-rated ORCL remains a top large cap pick and we're raising our Price Target to $66 from $61."
Oracle Overconfidence?
More cautious analysts on the street are less optimistic after conducting channel checks, possibly tempering market optimism on the market share gains ahead.
J.P. Morgan (JPM) , for example, conducts interviews with chief information officers across the nation to select the importance of each major technology vendor to their respective businesses.
While the survey was much broader than simply the applications space, it resulted in less-than-encouraging results on customer confidence.
"In past years, ORCL has been stable and received ~11% of the votes. However, this feedback again arced over in our fresh CIO survey, dropping to 6.5% of votes," the firm's analyst, Mark Murphy, warned. "At the same time, Amazon (AMZN) AWS improved from 9.5% of votes last year to 14.9% of votes this year, creating the appearance of a significant shift out of Oracle and into AWS."
The survey showed that Oracle ranked eight out of nine firms presented in terms of association with digital transformation projects.
Murphy noted that this finding was "disappointing relative to Oracle's scale and unfortunately lagging behind the likes of SAP, IBM (IBM) , and Cisco (CSCO) ."
"Despite its efforts to build a Cloud presence, Oracle rated no better than SAP in terms of association with Cloud Computing plans, and is nowhere close to the leaders Microsoft, Amazon, and Google GOOGL in this respect," he concluded.
Deutsche Bank (DB) analyst Karl Keirstead noted that Oracle may be overplaying its hand as traditional businesses lag as well, noting market share gains while signing agreements alongside the competitors it aims to defeat in the future.
"Oracle said that the recent agreement with MSFT Azure was all about enabling better connectivity as customers perhaps run databases on OCI and analytics on Azure and need to connect the two, but another source told us this week that Oracle was losing workloads to Azure and that it was forced to offer better connectivity to prevent losing these customers," he explained in a note to clients.
Additionally, as emerging technologies in non-relational databases from companies like MongoDB (MDB) come to carry developer market share, Ellison's outlook could likewise be overly optimistic.
As many have noted, one quarterly result a comeback does not make. The market-share data not only among the firms, but among their user bases, will be quite interesting to monitor.
AMZN, CRM, CSCO, JPM and JPM are holdings in Jim Cramer's Action Alerts PLUS member club.
