Oracle Corp. (ORCL:US) Chief Executive Officer Larry Ellison, whose sailing team is trailing Emirates Team New Zealand in the America’s Cup yacht race, is also facing headwinds in cloud-computing and business applications.
To combat that, the world’s biggest database-software provider is unveiling new products targeting customers of SAP AG (SAP) and International Business Machines Corp. (IBM:US) at the company’s OpenWorld customer conference in San Francisco next week. They include a high-end computer system that can tackle more data-processing jobs using fast memory chips.
Revenue growth at Oracle is slowing amid competition in the business-applications market from Salesforce.com Inc. (CRM:US), Workday Inc. (WDAY:US) and other providers of online software. While Ellison has been making acquisitions and investing in cloud tools that run over the Web, Oracle remains dependent on sales of programs installed on customers’ servers.
“License growth has stalled,” said Brent Thill, an analyst at UBS AG in San Francisco, who recommends buying the shares. “They’re underperforming the software market.”
To spur sales, Ellison is unveiling a package of hardware and software at a keynote on Sept. 22 that can speed up Oracle’s database software, co-president Mark Hurd said in an interview at Oracle’s Redwood City, California, headquarters this week. The machine features the Sparc chip gained in Oracle’s acquisition of Sun Microsystems.
Oracle needs new hardware to fuel growth, said Pat Walravens, an analyst at JMP Securities LLC in San Francisco who rates the company’s shares at market perform, the equivalent of a hold rating.
At the same time, Oracle sells a set of applications called Fusion that businesses can use to manage sales, supply chain, human resources and financial information. The company also acquired (ORCL:US) cloud companies in similar areas, including Taleo and RightNow Technologies.
Hurd said Oracle is the only business-software company that can offer a suite of Web-delivered tools for a wide range of applications. The marketing could be better, he said.
“This cloud suite is going to be a big deal,” he said. “You could argue we could have better awareness, and do more marketing, but you can’t argue the strategy.”
Part of that involves a new Oracle database called 12c, which was introduced earlier this year and targets businesses delivering cloud-computing services. The upgraded machine’s in-memory option will let companies run applications using faster memory instead of disk drives. SAP already offers an in-memory database called Hana.
Oracle will also unveil a new high-end Sun Microsystems server with an upgraded M6 chip. John Fowler, Oracle’s executive vice-president for systems who joined as part of the Sun acquisition four years ago, said in a recent interview that Sun’s product line needed lots of updating, a multiyear process.
“It was old when we came into Oracle,” Fowler said. “It moved from being old to being antique.”
Oracle’s combination of database software, business applications and hardware has attracted investors like Stephen Yacktman, co-chief investment officer at Yacktman Asset Management Co. in Austin, Texas. The firm, which owns more than 20 million Oracle shares (ORCL:US), according to a June 30 filing, made the investment at the end of the second quarter.
“They just have a great entrenched position with their database,” Yacktman said in an interview. “They don’t need to be in the latest trend in a year. They just need to get around to it.”
Ellison’s pay package declined 18 percent to $78.4 million for fiscal 2013 after he gave up an annual bonus and the company missed some of its profit targets, according to a filing with the U.S. Securities and Exchange Commission today.
Worth $41.8 billion and ranking eighth on the Bloomberg Billionaires Index, Ellison, 69, was the highest-paid CEO in the U.S. this year, according to data compiled by Bloomberg.
Shares of Oracle have gained 2.2 percent this year, compared with a 13 percent rise in the Standard & Poor’s 500 Information Technology Index.
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