February 22, 2021 BARRON’S 25
SHOPPING SPREE
Oracle has a long history of making large acquisi-
tions but in recent years has been more focused
on buying back stock.
TikTok/ Pending $12
NetSuite/ Nov. 2016 8.8
BEA/ April 2008 8.2
PeopleSoft/ Jan. 2005 8.0
Sun Micro/ Jan. 2010 5.7
Micros/ Sept. 2014 4.4
Siebel/ Jan. 2006 3.4
Hyperion/ April 2007 2.6
Taleo/ April 2012 $1.8
Acme Packet/ Mar. ’13 1.7
RightNow/ Jan. 2012 1.4
Responsys/ Feb. 2014 1.3
Datalogix/ Jan. 2015 1.2
Aconex/ Mar. 2018 1.2
Endeca/ Dec. 2011 1.1
i-flex/ Jan. 2007 1.0
Target / Date Value (bil) Target / Date Value (bil)
Source: FactSet$1 billion—Oracle Cloud Infrastruc-
ture is targeting and winning some
impressive customers, including
videoconferencing providersZoom
Video Communications(ZM) and
8x8(EGHT). In doing so, Oracle has
joined what had been a three-horse
race of Amazon Web Services, Micro-
soft Azure, and Google Cloud.
Magouryk, the executive who runs
Oracle Cloud, came to the company
more than six years ago from AWS
specifically to build the OCI business
from scratch. Magouryk says that on
the day he arrived, Oracle didn’t have
any physical data centers. Now, he says,
there are 30 around the world and
more on the way, and tens of thousands
of people work on the platform.
And Oracle is winning business
that it couldn’t get before.
“People think we are just moving
workloads around, but customers
don’t want to just move old stuff,” he
says. “They want to incrementally
improve, add on to existing services,
and modernize their infrastructure.”
CEO Catz says, “We have hundreds
of thousands of customers, so of
course there is a real opportunity to
help them move to cloud. But we are
also acquiring a whole new set of cus-
tomers, including video streamers
and start-ups, who have never
touched an Oracle database. Our
performance and price advantages
versus competitors are compelling
to both existing and new customers.”
Mehdi Salour, senior vice president
of global network and DevOps at 8x8,
says his company found itself scram-
bling for capacity as its business ac-
celerated in the early months of the
pandemic. Almost overnight, 8x8 saw
the user base for its videoconferenc-
ing service rocket from a few hundred
thousand to more than 20 million.
The company was struggling to keep
up with the load.
Salour says he contacted all of the
cloud providers, and Oracle offered
the most compelling option, in terms
of quality, cost, and geographic reach.
Oracle smoothly absorbed the vol-
ume, improving service quality while
cutting 8x8’s network traffic costs by
more than 80%. “It was huge for us,
saving us millions of dollars,” he says.
Last summer, Oracle got a big vote
of confidence from the influential
tech research firm Gartner. “It’s time
to include Oracle as a viable option
when evaluating public cloud provid-
ers,” Gartner advised information
technology executives.
The creation of Autonomous Data-
base, cloud-based apps, and OCI to-
gether demonstrate what amounts to
a radical change in Oracle’s growth
strategy.
For decades, the company ex-
panded its business via acquisition.
But it has been at least three years
since Oracle’s last major deal, the $1.2
billion purchase of construction soft-
ware firm Aconex in early 2018.
Yes, there is a complex plan for
Oracle andWalmart(WMT) to
jointly buy the social video app Tik-
Tok from China’s ByteDance. It’s on
hold, while the Biden administration
re-evaluates the situation. But that
deal only underlines Oracle’s aggres-
sive push into the public cloud. Ora-
cle’s interest in TikTok is driven not
by any grand plan to play in social
networks, but instead by a desire to
compete head-to-head for large cloud
workloads with AWS and Azure.
With Oracle’s acquisition appetite
largely sated, it is giving back excess
cash to holders. Over the past 10 years,
Oracle has reduced its share count by
more than 40%, repurchasing about
two billion shares. Oracle has a divi-
dend yield of 1.6%, in line with the S&P
500, and ahead of the recent 10-year
Treasury yield of about 1.2%.
No question, there are risks here.
In Amazon, Microsoft, and Alphabet,
Oracle is taking on gigantic rivals
with deeper pockets. Still, Oracle
shares look remarkably cheap, mak-
ing buying them a risk well worth
taking.
In aBarron’scover story on Oracle
18 years ago, the first sentence asked:
“Is Oracle still a growth stock?”Bar-
ron’sargued that it was, which was
true, at least for a while. “I don’t think
this is the end of the information age,”
Ellison said, all those years ago. “It’s
still just the beginning. Being the
No. 1 database company in the world
at the dawn of the information age is
a good place to be.” It still is.B
Who Rules the Cloud? The Precise Answer Can Be Hazy.
Who has the biggest cloud? Amazon Web Services, Microsoft Azure,
and Google Cloud Platform dominate the U.S. public cloud market,
with Oracle knocking on the door. But the data are obfuscated by defi-
nitions that can make comparisons among them almost impossible.
Amazonhas the clearest story: AWS had net sales of $12.7 billion in
the fourth quarter, and $45.4 billion for all of 2020. Sales were up
28% for the quarter, and 30% for the full year.
Alphabetreported revenue of $3.8 billion for its Google Cloud busi-
ness segment in the latest quarter, up 47%. But that includes results
not only from the Google Cloud Platform, its public cloud business,
but also from Google Workspace, the collection of productivity tools
that used to be called G Suite. Alphabet says that GCP—the piece that
competes with AWS—is growing faster than its overall cloud busi-
ness, but provides no details.
Microsoft’s numbers are messier. The company said that “commer-
cial cloud revenue” was $16.7 billion in the December quarter, up
34% from a year ago. But that’s not an actual reporting segment—the
company doesn’t even provide the number every quarter. And it rolls
up not just Azure but also Office 365 and other things. Maddeningly,
Microsoft also has an overlapping formal business segment called
Intelligent Cloud, which includes not only Azure, but also SQL
Server, Windows Server, Visual Studio, and GitHub, among other
elements. Intelligent Cloud had revenue of $14.6 billion in the latest
quarter, up 23%. Azure revenue rose 50% in the quarter, but—sigh—
Microsoft offers no dollar figure.
Oracle’s approach isn’t any better. Most of its corporate revenue,
including cloud subscriptions, is rolled into a bucket called “cloud
services and license support,” which was $7.1 billion in the quarter
ended in November, up 4%from a year earlier, and accounting for
71% of revenue. That basically includes all cloud services, plus any
recurring subscription services. Oracle partially breaks out some
cloud-related bits, but provides no dollar figures. —E.J.S.