Oracle's Next Conquest: The Cloud

Did Oracle (Nasdaq: ORCL  ) chief executive Larry Ellison just declare his intent to destroy salesforce.com (NYSE: CRM  ) ? His comments from last night's earnings call sound eerily belligerent.

"We think we can be the number one applications company, the number one on premise application company and the number one on-demand application company," Ellison said. "That's our goal."

But it wasn't always. Rewind to 21 months ago, when Ellison mocked salesforce.com as a money-loser and ridiculed SAP's (NYSE: SAP  ) on-demand efforts. He just wasn't interested in software-as-a-service or cloud computing at the time. Oracle's business was fine without it.

What's changed? Money. There's more of it to be had now than there was 21 months ago, at least as far as cloud computing is concerned.

And Oracle is collecting: Citigroup analyst Brent Thill encouraged Ellison's boasting by pointing out that the database king is now generating roughly $750 million annually from subscribers to on-demand versions of its software.

You might call Oracle Silicon Valley's richest chameleon; it profitably changes colors to suit the environment. There's money in cloud computing? Look! We're a cloud-computing company! There's money in high-powered hardware? Let's go get Sun Microsystems (Nasdaq: JAVA  ) ! I'm half-expecting Ellison-backed NetSuite (NYSE: N  ) , a salesforce.com competitor, to be Oracle's Next Big Deal.

Oracle needs more growth businesses. For its fiscal fourth quarter, non-GAAP revenue dipped 5.5% to $6.9 billion, and non-GAAP net income fell a penny to $0.46 per share. Both results beat estimates, however, thanks to a 51% non-GAAP operating margin -- a two-percentage-point improvement year over year.

Such careful expense management is admirable, but it also can't be a growth driver. Fiscal 2009 new software license revenue inched up just 1% after accounting for currency effects. Further acquisitions could remedy that. Certainly the Sun deal, when it closes, will have some impact. But the broader war for growth has moved to a new front: the cloud, which probably means more deals like this one.

Hurricane Ellison is building strength. Time to bolt the doors, salesforce.com.

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy sees profits -- and, oddly, a light green Chevy Malibu -- in your future.


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