FORTUNE -- Oracle had some positive pre-holiday news for investors this week. The database giant's second-quarter results came in higher than expected, with revenue rising 2% to $9.28 billion, and net income declining about 1% to $2.55 billion.
Yes, that was good news. The quarterly numbers sent Oracle (ORCL) shares up more than 6%, the highest in years.
But despite the company's decent quarter, many investors viewed the recent earnings as not much more than a "modest near-term positive," in the words of Macquarie Capital analyst Brad Zelnick. Why? The competitive landscape is getting harder, not easier, for legacy vendors like Oracle, especially given CIOs' increasing preference for software that's delivered online, not via on-premise installations.
Case in point: A recent CIO survey from financial research firm Bernstein C. Sanford showed that the move to software-as-a-service may have a "meaningful impact on Oracle as a greater net share of CIOs see spending less of their IT budget with Oracle in five years than any other vendor in our survey." Ouch. According to the survey, Oracle in particular is viewed as a laggard, reflecting the company's tardy embrace of the cloud. Again, from the report: "From a vendor perspective, CIOs' view of HP appears to be improving off a very low base, EMC and VMware remain in good shape medium to longer-term, and Apple and Samsung appear poised to gain more enterprise spending dollars. On the flip side, results point to declining share of spending for IBM, DELL, HP, and particularly Oracle." Ouch again.
To be fair, Oracle CEO Larry Ellison has bought into the cloud, quite literally: He has spent billions of dollars buying up cloud computing companies like Taleo and RightNow Technologies over the last few years. (Just this morning, the company acquired the cloud-based business-to-consumer marketing firm Responsys for $1.39 billion.) The results appear promising. "Our billion dollar SaaS business delivered overall bookings growth of 35% in the quarter," Ellison said in a release issued earlier this week. "Our fastest-growing cloud services were Fusion Human Capital Management and Fusion Salesforce Automation, each growing bookings at a triple-digit rate."
At the same time, sales of new software licenses and cloud software subscriptions revenues were largely unchanged from the previous quarter, and the company's hardware business isn't out of the woods yet either. And while Oracle now has a portfolio of cloud-based software products, pure-play software-as-a-service players like Workday (WDAY) and Salesforce.com (CRM) are growing at a much faster -- albeit money-losing -- rate, and taking market share away from both the Redwood Shores, Calif.-based company and other legacy vendors. To fight back, Oracle has tried rejiggering its sales force to try to compete head-to-head with its younger, nimbler rivals. But its increased spending on sales and marketing -- increasing at a faster pace than revenue is currently growing -- means increasing pressure on its bottom line.
So where does Oracle go from here? "We would not be surprised to see ORCL drift higher, especially if market gets defensive," Cowen & Co analyst Peter Goldmacher wrote in a recent note to clients. "However, we believe fundamentals remain lackluster and specter of declining margins is upon us."
In other words, whether or not Oracle is all in on the cloud -- and regardless of its better-than-expected recent quarter -- the company's uphill battle is far from over.
Ex-Peoplesoft execs successfully founded Workday after Oracle's hostile buyout. But can they successfully make a profit?
FORTUNE -- The technology industry loves an underdog, especially when a scrappy startup makes breakfast of a bloated incumbent. In enterprise software, Workday (WDAY) has emerged as just such an underdog, using a cloud-based business model to handle human-resources software and take on giants like Oracle (ORCL) and SAP (SAP).
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Ahead of the Oracle Open World developers' conference, co-president Mark Hurd spoke to Fortune about the software giant's shift to the cloud, and what else is next.
FORTUNE -- Mark Hurd has been co-president of mega-cap technology company Oracle for three years now, having joined shortly after his dramatic exit as CEO of Hewlett-Packard. Hurd's dramas these days are the more typical business type: Oracle's coming to grips that it is MOREAdam Lashinsky, Sr. Editor at Large - Sep 23, 2013 10:41 AM ET
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As customer relationship management finds itself at a crossroads, Nimble aims to take a bite out of Salesforce and others.
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FORTUNE -- "CRM" looks like yet another jargony business acronym -- it stands for "customer relationship management," which just doesn't sound all that sexy.
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Concern that the headwinds hitting Oracle are not cyclical but secular are growing.
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FORTUNE -- What do you do when you are the best company in your industry, but your industry is mired in a slump of mediocre performance?
That's the dilemma faced by Oracle (ORCL), the enterprise software giant that has long been the most feared player in the competitive market for business software. Last week, Oracle reported that MOREJun 28, 2013 10:52 AM ET
Long-time opponents are teaming up.
FORTUNE -- It's the end of an era. Or the beginning of one, as Oracle and Salesforce.com would describe it. The formerly sparring enterprise tech companies hosted a conference call for press and analysts Thursday afternoon, in which they outlined a new, nine-year partnership through which their respective cloud-based applications will work hand-in-hand.
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Google's CEO decried the negativity in the tech industry. Too bad the company's executives have a long history of trashing the competition.
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FORTUNE -- Larry Page, Google's chief executive, is fed up with the negativity in the technology industry and the news media that covers its every detail like a prizefight.
"Every story I read about Google is 'us versus some other company' or some stupid thing, and I MOREMay 16, 2013 7:03 AM ET
The German software giant is betting on cloud-based technology and services.
FORTUNE -- In case you haven't heard, SAP is serious about the cloud. On Tuesday the enterprise software giant announced it will offer HANA, its in-memory database, as a monthly subscription service, delivered via the cloud.
A limited cloud-based version of HANA was already available through Amazon (AMZN) Web Services. But SAP (SAP) says customers will now be able to access MOREMichal Lev-Ram, writer - May 8, 2013 10:26 AM ET
Apple is the largest slice of the 500 and it's one of only three stocks whose P/E shrank
FORTUNE -- Apple (AAPL), Oracle (ORCL) and EMC (EMC).
Those are the only three companies in the S&P 500 whose price-to-earnings ratio did not grow over the past 90 days, according to a Seeking Alpha piece posted Monday by someone or something called Pendulum.
The other 497 companies have all seen their valuations increase to MOREPhilip Elmer-DeWitt - Mar 25, 2013 11:13 AM ET
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