The wheels finally came off the Oracle bus. The attrition of top talent reached a tipping point globally. A futile record long strike has not made a difference for Oracle Korea.
http://www.theinvestor.co.kr/view.php?ud=20180710000573
The union claims that workers are suffering from a decline in real wages because there has been no increase in basic salary for the last 10 years, while half of the salary is based on incentives.
Its true and its global. The talent drain at Oracle has been severe, with a rapid exodus over the past 3 years. The remaining few may be wondering why Oracle has not given a raise in over a decade and what the strategy at Oracle is. I left the company over a year ago and went to a database competitor. Oracle has taken its focus of its core product, the oracle relational database and is now a "cloud company."
It has not given a raise to its employees, it has not invested in its core technologies and its not going after top technical talent, rather its plan is to go to telemarketing centers staffed with recent college grads. Is this a recipe for success?
Oracle will pivot to the cloud and be as successful in the cloud as it was in the hardware business. The acquisition of sun is now an admitted and rather bitter failure for all involved. The losers include the employees and customers that thought Oracle had a chance to break into that market.
What was the problem? In my opinion the reason it failed is outlined very well in this article written September 9th 2010.
https://www.datamation.com/columns/article.php/3902836/Why-Mark-Hurd-is-a-Bad-Match-for-Oracle.htm
Why Mark Hurd is a Bad Match for Oracle
Hurd’s skill set, which trades off the strategic for the tactical, would have been great at Sun while it was being packaged for sale to Oracle. But it will likely be unsuccessful in the recovery stage it now finds itself in. Key employees will not want to stay with Oracle if they believe that Hurd will mostly cut their benefits, entitlements, and shift their jobs to lower cost locations without them. Attracting qualified employees will even be more difficult and the ones they do get are will likely be in “any port in a storm” mode and unlikely to be particularly loyal.
This is a bad match of skills and one you would think Larry Ellison would know to avoid.
The real question is why did LE hire MH?
https://www.reuters.com/article/us-hp-ellison/oracles-ellison-blasts-hp-board-for-hurds-exit-idUSTRE67905K20100810
“The HP board just made the worst personnel decision since the id--ts on the Apple (AAPL.O) board fired Steve Jobs many years ago,” Ellison wrote.
Not to be out done by HP, LE made an even bigger disastrous personnel decision. He actually hired MH. He did so with a purpose.
MH is known for cutting costs. I have met with him and talked with him while working at Oracle. I have listened to the executive discussions around sales. Its a rather simple metric. How much does it cost you to bring in revenue? If its costs 1.5 Million to bring in 2 million worth of sales then its a calculation that is very similar to cost of goods sold.
Oracle is facing is an increasing pressure from all sides on its database market. Hadoop, NoSQL and other alternatives to traditional RDBMS solutions are eating away at new growth opportunities with very large datasets. All the while other RDBMS solutions like SQL Server and Postgres chew away at the traditional market space.
The decision was made a decade ago to move out of the traditional database market. The first attempt was extremely successful with Exadata. It was an engineered system that still has tremendous capability to handle large data sets. Its also complex and not based on opensource commodity hardware that scales in the cloud. (Not yet anyway... more on that in a second)
The focus at Oracle has been on holding customers hostage, and digging deeper in the pockets of existing customers rather than expanding to new areas. At the same time costs have been reduced to prop up revenue numbers. The cloud as it is consists of rented data centers and a hodge podge of technologies that dont work together. Additionally Oracle is riddled with legacy products like People Soft that still (to this day) have no road map to migrate to the cloud... ever.
What is going on? We have new start up companies that offer promising cloud functionality that Oracle acquires for top dollar. If you look at Netsuite you see it hasn't really helped Oracle. It did give LE about a 3.4 Billion Dollar payout as he owned 41% of the company.
https://www.forbes.com/sites/katevinton/2016/07/29/oracles-acquisition-of-netsuite-will-give-larry-ellison-more-cash-but-could-decrease-his-total-net-worth/#781bf5b64c50
All in all, buying NetSuite may be good for Oracle's cloud business but it is hardly a money-maker for Ellison and won't significantly impact his total net worth.
Doesn't make sense does it? Why hire someone that cuts costs and shrinks market growth? Why buy products that don't really impact Oracle's value in a meaningful way? Lets take a look at the broad market and how Oracle fits in.
https://marketrealist.com/2018/01/oracle-positioned-database-space
https://www.statista.com/statistics/810188/worldwide-commercial-database-market-size/
https://www.forbes.com/sites/louiscolumbus/2018/05/23/10-charts-that-will-change-your-perspective-of-big-datas-growth/#270b1a2c2926
What we see from the links above is an ever shrinking trend for the traditional database market with estimates less than 22 billion by 2021... and a huge market for big data expected to be 42 Billion in 2018. Big data means Hadoop, NoSQL and extremely salable databases like MongoDB, CouchBase, HBase and the like. Relational databases falter at about 10 terabytes... when all the joins required for the 3rd normal form begin to fall apart. You have to create a star schema and demoralize the data in a data warehouse to get performance for relational to handle hundreds of terabytes.
So whats really going on at Oracle? Its simple. Oracle is not really trying anymore. Its shutting down. Its a last ditch effort to keep the lights on. It wont end right away, but it will end sooner than you think. Oracle has lost its way. Its only hope is to create new cloud software, it wont be a cloud provider. It will revert back to a software company as it scales way back.
Exadata software could easily be ported to commodity hardware and run in AWS. That will be a true cloud based offering that with have some clout as a strong RDBMS offering. Perhaps Oracle might shift its relational offering and become more document oriented to compete in the NoSQL space, but I wont hold my breath. I really think this is the year that the wheels come off and everyone sees the dire straits Oracle is in. Its a great stock to short over the next year,