Many analysts here at Seeking Alpha really like Oracle (ORCL).
Cameron Kaine calls it incredibly cheap. Bret Jensen says it is poised to rebound. Chuck Carnevale is absolutely pounding the table for the stock.
In the near term they may be right. As a trade, Oracle is trailing its past performance, and that of its peers like Microsoft (MSFT) and EMC (EMC).
But my specialty is the broader trend, and for Oracle that's not so good.
Secular changes in technology tend to kill incumbents. The Internet killed many companies, and the device revolution pioneered by Apple has killed others.
The change overtaking Oracle is called the cloud. By using virtualization and distributed computing, enterprises can now handle big data or the "rush to the rail" of users discovering the next Facebook. Enterprises see the savings, or at least the new capabilities, and are moving there with all deliberate speed.
Oracle has what it calls a cloud strategy, but history is not kind to incumbents. What's gained in the new is usually lost faster in the old. And Oracle is as thoroughly tied to "enterprise computing," as defined in the last decade, as Dell (DELL) was to mass-customized PCs and Silicon Graphics was to graphic computing. Swallowing a dying sector, as HP (HPQ) did a decade ago in buying Compaq, is a strategy that never works.
JMP's recent downgrade of Oracle was based on this, as Patrick Walraven explained to Forbes. Oracle's license sales rose just 2% in December, not because of Europe, but because customers are saving up for their cloud moves. That may be why analysts new to the stock, like Longbow Research, are just neutral on it.
Oracle has sought to fight this by waiving extended service fees on some software, but that's a short-term move. They're also issuing white papers that cluck-cluck at how unprepared customers are for big data.
Oracle can still do some good things. Its improvements to the open source mySQL database are things it can capitalize on. There are technology lagging industries, like healthcare, where Oracle can still find opportunity.
When I last looked at Oracle, a few weeks ago, I said that its cloud strategy is clear, and that it's Software as a Service (SaaS). Like SAP, Oracle is going to buy as many applications suited to the cloud as possible, and seek to squeeze those customers.
But Oracle is no longer just a software company. It's a hardware company. Buying Sun Microsystems didn't just give it a leading place in open source - it made Oracle a hardware company. And it's high-end hardware that's most under threat from the cloud, since clouds can be built with commodity hardware.
The warning signs are clear. Even the CIA is alert to them. Change is coming. And Oracle is not leading that charge, it's in the way.
Disclosure: I am long MSFT.
Additional disclosure: I was long Dell, but sold out my position about a week ago.
