Analysis: Oracle's sales miss magnifies fears about cloud missteps

Sat Jun 22, 2013 12:11pm EDT
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By Jim Finkle

BOSTON (Reuters) - "What the hell is cloud computing?" Oracle Corp ORCL.O Chief Executive Larry Ellison said during a diatribe against the whole concept at an investor Q&A in 2008.

Asked to describe his strategy for expanding into a then-small but rapidly expanding sphere, the software giant's head said he had no idea what people were talking about when they referred to cloud computing, describing it as "nonsensical" and those writing about it as "insane".

Five years after Ellison's rant went viral on YouTube, the billionaire is struggling to fit his ageing IT giant into a newly cloud-centric world - a hard scramble spotlighted by what analysts said was Oracle's first fourth-quarter miss on new software sales in a decade.

Its rivals have grown, winning business from corporate and government customers seeking cloud-based software that is cheaper and faster-to-deploy than traditional offerings housed in massive inhouse datacenters.

Oracle is now striving to catch up with its own line of cloud software, built up partly through acquisitions. Ellison has forged alliances with long-time bitter rivals Microsoft Corp (MSFT.O: Quote) and Inc (CRM.N: Quote) to drum up new business. On Thursday, Ellison said he will announce those partnerships next week, but provided few details.

Oracle stuck for years to building high-end multi-million dollar "engineered systems" that bundle hardware and software in one package. It started selling them with Hewlett-Packard Co (HPQ.N: Quote) in 2008 and then partnered with ailing computer maker Sun Microsystems, which it agreed to buy in 2009.

Oracle says the engineered systems strategy has been a big success, helping woo business from rivals IBM (IBM.N: Quote)and SAP

"They spent the last four years focusing on engineered systems when the bigger industry trend was the cloud," JMP Securities analyst Pat Walravens said. "They now have a structural problem."   Continued...

Co-founder and Chief Executive of Oracle Corporation, Larry Ellison introduces the company's latest SPARC servers at Oracle Conference Center in Redwood Shores, California March 26, 2013. REUTERS/Stephen Lam