One thing you can definitely say about Oracle earnings calls is that they are never boring. This week’s fourth quarter call was no different. Apart from the fact that it arrived three days early, it also showed net incomes rising by 7.5 percent, and it looks like one of their sales VPs is "leaving" the company.
According to those in the know, all three things are related, although with Oracle who is ever really in the know except perhaps CEO Larry Ellison, and he’s staying silent. Silent about everything except the progress the company has made in software sales over the past quarter.
VP Leaves, HP in Spotlight
But what people were really asking -- and as of this morning there is still no answer -- is whether Executive Vice President Keith Block, who is (or was) in charge of software sales, is still on board.
Why the speculation? Well, it all goes back to HP and the strained relationship between Oracle and HP that saw the two of them hurling confidential snippets at each other, like pies in a cheap comedy show.
But the snipes were pretty mean and the markets weren’t laughing as Oracle's share price dropped by 2.1 percent to US$ 27.12 at the close of business on Monday, though the results pushed it back up in after-hours trading.
Let’s be clear about this though: the snipes are alleged to have been exchanged via instant messages last year -- last July in fact, in an exchange between Block and a human-resources executive which were used in an ongoing breach of contract case with HP.
Block described Mark Hurd, who now heads Oracle’s hardware division, as someone who doesn’t like to travel out of the US. “Lots of noise, not many results,” the messages said.
He also described Oracle’s hardware business, which grew considerably after the acquisition of Sun, as “dead, dead, and dead”.
“We bought a dog. ... Mark wants us to sell the dog,” Block is alleged to have said.
Cloud or Hardware?
Leaving aside the sniggering, there is an issue here that Oracle needs to deal with and it is the one most likely to have had an impact on the share price: Oracle’s attitude to cloud computing and hardware.
Cloud is the wave of the future and even Oracle has acknowledged it. We saw only recently Larry Ellison himself extolling the virtues of cloud at the launch of Oracle’s public cloud.
Block apparently also complained about the company’s head of cloud services, saying that she was taking money away from the hardware division.
Some analysts see in the exchange signs of reorganization in the company in this quarter, and part of that reorganization may be the departure of Block.
Oracle Revenues Jump
Even so, and even if Larry Ellison held the earnings call to draw attention away from the problems revealed in the instant messages, Oracle has done exceptionally well during the fourth quarter, particularly in software sales.
Revenues rose by 1.3 percent to US$ 10.9 billion, sales of new applications licenses rose 23 percent, while sales of new database licenses accounted to two thirds of license sales.
Ellison also indicated that Oracle had won three cloud computing deals against competitor Workday, and also managed to sell a high-end hardware system to Facebook. Software license sales, always an indicator of company health, rose 6.7 percent to US$ 4 billion.
However, you can’t have it every way, and neither it seems can Oracle. It didn’t do at all well in the hardware division and its associated services, with revenues falling by 14 percent.
Leaving the last word to Larry Ellison, and something to watch out for in the future, he said Oracle had already hit the US$ 1 billion run rate and is now second to only one other company in the space. That company is Salesforce, but as is typical, he just couldn’t bring himself to name it in a positive light.