Why I Sold Oracle

After seven years of holding and reinvesting, I sold 100% of our family's stake in Oracle (Nasdaq: ORCL  ) in September. The decision was easier than you might think. Why? At the OpenWorld conference held earlier this month, CEO Larry Ellison all but admit he'd run out of growth ideas.

The trouble with bluster
He didn't say so specifically. Rather, Ellison announced a series of new initiatives for serving corporate clients interested in cloud computing. Trouble is, every one of them smacks of something we've already seen from someone else, notably salesforce.com (NYSE: CRM  ) .

But hey, don't take my word for it. Oracle describes the new Public Cloud service as an "enterprise cloud for business" that supports different applications and services hosted by Oracle and available on a subscription basis. Sound like anyone else you know?

Wait, it gets better. The apps, apparently powered by the long-awaited Fusion architecture, include a blend of services that sound even more like what others offer:

  • Fusion CRM in the Cloud, which Oracle describes as a software-as-a-service (SaaS) platform for helping "sales professionals outsmart their competition" in part by "collaborating" smarter. Never heard that one before. Except from, you know, salesforce.com.
  • Fusion HCM and Talent Management, which Oracle describes as another SaaS platform but for unleashing the "power of your people" via human resources. What other companies do this? How about SuccessFactors (Nasdaq: SFSF  ) and Taleo (Nasdaq: TLEO  ) ?
  • Oracle Social Network, which is exactly as it sounds -- a social network built into the Public Cloud for helping users collaborate in ways familiar to those who already use Twitter, Facebook, or the new Google+ network. Oh, and don't forget Yammer and Chatter, salesforce.com's own popular network for connecting users with customers and partners.

In short, I can't think of a single breakthrough Oracle is offering with Fusion Apps and the Public Cloud.

They can take our data, but they'll never take ... OUR FREEDOM!
Ellison, for his part, told a keynote audience that what sets Public Cloud apart is the ability to move data into and out of Fusion Apps at will. By contrast, salesforce.com encourages clients to develop using its own Apex language, reducing compatibility with outside systems. That's proved to be an opportunity for data-integration specialist Informatica (Nasdaq: INFA  ) , which has created a custom set of tools for moving information from salesforce.com to SAP. With Public Cloud, Oracle is telling users they shouldn't have to invest in integration.

Compatibility is important. So is data portability. But to go on stage and finger-wag at salesforce.com for not being 100% compatible with other systems is just low, especially when Oracle has made millions (billions?) selling its own data-integration tools. "The roach motel of clouds," TechCrunch reports him as saying when describing how salesforce.com allows clients to check in but not check out.

Point that finger elsewhere, Mr. Ellison
Call it Oracle's "Wag the Dog" moment, with Ellison creating hubbub over data "lock-in" in order to avoid admitting there isn't much new in what he's proposing with Fusion Apps and the Public Cloud. He's co-opting salesforce.com's message in the hope of stealing back install-and-maintain application software sales lost to the rise of cloud computing.

I can't abide that. Why? Because in this Extreme Makeover, Larry Ellison ignores his time spent pooh-poohing cloud computing. Four years ago, during an earnings call, he flat-out called it a bust.

Ellison has since changed his mind. He sees the threat cloud computing creates for Oracle's business. And with a hefty stake in NetSuite (NYSE: N  ) , a supplier of on-demand business software built primarily to handle complex back-office functions such as inventory, manufacturing, logistics, and research and development -- functions not typically handled in a salesforce.com implementation -- his ranting about Fusion and openness smacks of opportunism at best, hypocrisy at worst.

Oracle was a good stock for our family portfolio once. No longer. The database king has stopped leading and started following. Do you agree? Disagree? Please weigh in using the comments box below. And if you're in the mood for more Web-centric stock ideas, try this free video. You'll walk away with a better understanding of the cloud computing movement that Netflix is profiting from and a winning stock idea from our Rule Breakers scorecard. Watch now -- it's 100% free.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Google and Oracle. Motley Fool newsletter services have recommended buying shares of salesforce.com, Informatica, and Google and also shorting Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 27, 2011, at 7:03 PM, bjasleep wrote:

    I am not sure I agree. Yes Oracle is a late-comer but I think it is about to eat CRM's lunch with this initiative. If anything, I would be selling CRM.

  • Report this Comment On October 27, 2011, at 8:11 PM, HoopMaster wrote:

    If your relying on Larry, you are relying on the wrong thing. Larry is now pretty much disconnected. I won;t go into a medical analysis of the word "disconnected." But when Larrry is factual is when there is big news that is supported by the grapevine. For example, the latest purchase of a 'cloud' outfit. That was all generated by the 'Co-CEO' and the staff. It was an outstanding move, necessary to insure that ORACLE stays 'State-of-the-Art.' My hope is that they take that move forward and bring SUN servers out of the closet as a plat\foirm for the cloud. Think about it for a moment. That means one company, one database combined. Nio chasing 2 companies, such as IBM and all sorts of sources for databases. You had best buy back in. I spent many years in the 'field' and when you have multi-suppliers on one functional Enterprise, forget it. If you love fingerpointing circles, then you were smart for selling ORACLE. It sure wasn't a well thought out decision. The only time you listent to Larry is on his boat, when he says "Look Out" that means he did a poor job of tacking.

  • Report this Comment On October 27, 2011, at 8:31 PM, blisenko wrote:

    I think you are a FOOL. Oracle is going to each Saleforces, SAP's, HPQ's and IBM's lunch. There Fusion Applications can be run by oracle, on premise or by a third party. No other software company in the world and say this. All other cloud companies software is run, updated and managed by them. Oracle give you a choice and with over a 100 different programs in Fusion you can mix and match how you want the Apps deployed. This is a big cost savings potential to their customers.

    If you need more, their hardware is the fastest in the world. Speed always wins out.

    Middleware, once again the leader.

    They have an integrated stack that will make it less expensive to deploy software because they now have the scale to compete with anyone and discount in one area to gain market share.

    You fool!

  • Report this Comment On October 27, 2011, at 9:03 PM, Fates123 wrote:

    Pretty lame reasoning; this guy didn't even mention Oracle's hardware division. I have one question; has Oracle been growing rev, EPS, etc?

  • Report this Comment On October 27, 2011, at 10:17 PM, S4BO wrote:

    Wow, seems like some one is quite high on Oracle's Kool-aid, buddy you need the cross check Oracle's marketing engineering claims.

    Oracle's HW divisionh is non-existent, the HW is now an excuse sell more software and Fusion is just a big scam to lock-in customers, yes there's a ton of software on their con-Fusion offering, now tell them to actually make it work, i-n-t-e-g-r-a-t-e-d

    Now, Chatter is for SF customers, yammer has a free option for a reason, OSN looks more like LotusLive, BTW you should do a little more research, or IBM a better marketing perhaps. LotusLive has been around for a while now, and Panasonic is an actual paying customer! 150k seats: https://www.lotuslive.com/en/videos/index.php?id=panasonic_r...

    Now, if a CEO is not a reliable source of information for company direction? Who is? Safra? Hurd?, Ellison lackey sent to bully SF on stage? The guy who knows what make CIO's tick? http://www.informationweek.com/news/global-cio/interviews/23...

    So, if Ellison, they guy who mocked Cloud 2 years ago, the guy who "boxed" the Cloud last year, is not a reliable source for Oracle's strategy and vision, he shouldn't be Oracle's CEO anymore.

  • Report this Comment On October 28, 2011, at 12:01 AM, StevePerT wrote:

    Oracle has a growing hardware business. Exadata was the first - and now the fastest. Followed by Exalogics for super sweet mid-tier - sprawling MT farm is gone, now the Exalytics Business Intelligence machine, not to mention the Big Data Appliance for all those blogs, photos and other unstructured data. Get the quarterly - follow the numbers.

    Plus, if Oracle is going to be doing the same as others are seems like opportunity to steal market.

  • Report this Comment On October 28, 2011, at 11:56 AM, S4BO wrote:

    Oracle since version 2 of their RDBMS, actually v1.0 never existed, Ellison lied to their potential customer to "assure" them the product was mature, ever since then, deception, half-truths and plain lies have been Oracle's marketing strategy.

    Is Exadata good, certainly; Is as fantastic, record setting as they claim? Hardly.

    http://www.teradata.com/assets/0/206/276/5bfc4694-ce82-4a07-...

    https://www-304.ibm.com/connections/blogs/davidian/entry/exa...

  • Report this Comment On October 28, 2011, at 1:08 PM, fmot wrote:

    You do not need to 'invent' or 'pioneer' something to be sucessful. You can come from behind and still succeed if your product can leapfrog the competition. An example is Apple: They did not invent smartphones, but their Iphones surpass the competition. Then they expand their ecosystem to get more customers. That the same strategy Oracle is doing.

    Larry and the cloud: Larry believes in the cloud many years ago. I was an Oracle employee begining in the 1990. At that time, Larry's visions was software should be like 'water comes from faucet': You just turned it on, and no need to store water tank at your house. However it was too early to build a cloud portfolio then, not to mention Oracle already has a growing on-premise software business. His reaction to CRM or other cloud companies is an acting job: He talked them down in the public, but he wants to have a strong cloud portfolio behind the scene and wait, and wait until the time is right. Now it's the time. Can his products leapfrog the competion? We'll see. I believe he can because Oracle has a complete stack that none other vendors including IBM has In the 1990s Oracle discounted their ERP software up to 90%. No more as the result of it: If a customer wants an integrated stack, they must look at Oracle, because Oracle is strong, and had very few competion in that area. I own Oracle shares for 15 years now, and do not sale a single share yet. It was my mistake when it went up so much the dot com area. I did not make another mistake to sale it when the dot com bursted. When Oracle tried to acquire PeopleSoft, the street thought it would fail, because they said the main asset was the people, not the software and PeopleSoft employees would left. However I believed if a company could pull it off, it would be Oracle, and keep my Oracle shares. My reason was the PeopleSoft customers and their maintenant fees was the reason Oracle wanted PeopleSoft. In software business, mass means everything, because selling 1 copy has the same cost as selling 100 copies, and Oracle knew that. As the result, their margin goes up and up. When Oracle bought Sun, people again wrote them off, but I thought it was a good move: Oracle would make money from Sun hardwares by selling 'high end' servers. Oracle is now in the industry's sweet spot, and their destiny is within their control. The competion is fierce in high tech, but I think it's up to them to win or loose.

  • Report this Comment On October 29, 2011, at 10:41 AM, pfolgado wrote:

    From a technology and market analyst point of view, your comments are absolutely defensible (although I don't share them at all). And if you feel so strongly confident about them, I accept that you may be uncomfortable with owning Oracle stock. But that is not is the base for an investor's decision. The question is: will Oracle execution in the market, even if implementing what you see to be a 'me-too' position, result in a depreciation of its market value? I doubt it. On the contrary, I think Oracle will be able to capitalize on these emerging technologies and trends and make a very interesting profit on them. On my part, I'll keep my Oracle stock.

  • Report this Comment On October 31, 2011, at 11:14 AM, zoningfool wrote:

    While I respect your decision and wish you well in your future investments, I didn't get into Oracle because it was a great innovator, so the fact that it might be copying others--by its own internal efforts or simply buy buying them and making them part of Oracle--doesn't really matter as to whether or not I buy, sell or hold the stock.

    What got me into Oracle in the first place was its strong margins, its ability to generate operating cash flow, its stature as a market leader and the fact that it had a CEO who would fight to the death for its survival. All those factors remain in place. And on top of that, it continues to grow earnings at ~20% a year--not an insignificant fact. So until it falters in those factors, I will be holding--not selling-- my position.

  • Report this Comment On October 31, 2011, at 2:59 PM, Croato87 wrote:

    I laugh with a little sadness at those citing "consistent earnings growth" as their reason for investing in Oracle. Oracle has earnings management written all over it, and may be one of the worst accounting frauds we've ever seen.

    The red flags are ubiquitous. Of course the CEO will fight to the death for its survivial: it's paying him 100 mm clams a year! That alone virtually eradicates any profits it would be making. The bulls keep citing various innovations such as "Exalogics" with fancy names but which I have never actually heard of anyone using: we are supposed to believe that "everyone uses Oracle, they just don't know it." I have a better idea: no one uses Oracle, they just don't know it.

    Keep investing at your own peril. Maybe you can ride out the rise: it seems this Motley Fool writer did. But the fall will come swiftly. I laugh sadly.

  • Report this Comment On November 03, 2011, at 12:27 PM, zoningfool wrote:

    "one of the worst accounting frauds we've ever seen."

    Really? And your evidence is......? Feel free to come over to the Oracle board here at The Fool and post your analysis as to exactly how you arrive at this brazen and unsubstantiated conclusion. I'll be waiting for your figures. Not holding my breath, though....

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