Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Oracle reported second-quarter results last night, beating analyst targets on both the top and bottom lines. The stock wavered for a while, waiting for Oracle's management to add guidance figures in the scheduled analyst call later in the day.
As it turned out, Oracle's guidance wasn't all that impressive -- largely in line with analyst estimates. But what happened next allowed Oracle's report to move the stocks of other companies, stretching as far as the the Dow.
Microsoft (NASDAQ: MSFT ) doesn't have a whole lot going on today, and certainly no market-moving news. If anything, Microsoft shares could have been expected to jump, given a bullish research note from analyst house Jefferies last night.
Instead, we're actually talking about the Dow's worst performer today. Microsoft shares fell more than 1% overnight, and Oracle looks like the catalyst.
You see, Oracle CEO Larry Ellison took time out to talk about his cloud-computing strategy during that analyst call. He pointed out a handful of current cloud leaders by name, threatening to steal their market share by offering a cloud platform with competitive pricing and unmatched brand strength.
"Our database brand is the Oracle Database 12c and our programming language brand is this thing called Java," Ellison said. "So we think we have a much stronger platform than any of our software-as-a-service competitors."
OK, so what about the price parity?
"We intend to be price-competitive with Amazon, (NASDAQ: AMZN ) and Microsoft Azure, and Rackspace (NYSE: RAX ) ," he said. "So we're going to be cost competitive and price competitive at the infrastructure level, while being highly differentiated at both the platform level and the application level. Already, we have more enterprise SaaS applications than any other cloud services provider. We'll continue to expand our footprint and use our size as an advantage."
And there you have it. Microsoft took this one on the chin, because Redmond's investors really like the growth prospects of the Azure cloud platform. I felt the Rackspace jab personally, since I own the stock -- share prices on the cloud specialist plunged nearly 4% on Ellison's threats. Introducing a new competitor into the cloud market with Oracle's brand strength behind it is, to put it mildly, not good news for these stocks.
Amazon shares didn't really move, but that stock is sort of ironclad during the holiday shopping season anyway. And you might have expected IBM (NYSE: IBM ) to fall alongside Microsoft, but Big Blue is trading higher today thanks to a just-announced and very astute acquisition in the cloud space. So Oracle wasn't able to move all of its cloud rivals, just the ones without the means to fight back right away.
And that's how Oracle moved the Dow today, without even being part of the elite index.
Microsoft has feared the cloud since Bill Gates ran the company
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