Facebook Inc (FB): When Tech Upstarts Battle Titans, Money Becomes a Major Issue

A gorilla’s influence

If you have not already surmised, it is Oracle’s influence in the enterprise space that is causing these previous two companies to spend more money than they make. Oracle’s revenue has hovered around the $9 billion mark each quarter and it has a major incentive to chase down cloud opportunities that both Workday Inc (NYSE:WDAY) and salesforce.com, inc. (NYSE:CRM) are trying to monetize.

Source: Computer Weekly

Although Oracle Corporation (NASDAQ:ORCL) differentiates itself in the enterprise category by selling hardware, it derives 70% of revenue from software. That’s exactly the business its competition wants to be in. But unfortunately, Oracle’s R&D expenditures mean that both salesforce.com, inc. (NYSE:CRM) and Workday Inc (NYSE:WDAY)are constantly playing catch-up. In 2012 Oracle spent $4.5 billion on R&D. That’s more than the $3.3 billion in combined revenue that Workday and Salesforce pulled in during 2012.

It’s not smart to fight a gorilla

Many businesses realize that, in competition, battling a large incumbent is not a good idea unless you can do it with pure guile. Both Workday Inc (NYSE:WDAY) and salesforce.com, inc. (NYSE:CRM) are in what looks like a money-losing struggle with Oracle, a fierce competitor whose CEO, Larry Ellison, is seemingly fueled by an insatiable desire for revenues. That and a consistent $2 billion-plus profit quarter over quarter!

There is promise for the two smaller upstarts, but thinking outside of the box is going to be key. Thinking about making actual profit with said smarts would be helpful too.

It kind of makes you wonder if Workday or salesforce.com, inc. (NYSE:CRM) ever considered the idea of getting into the social networking business. If you’re consistently losing money like they are, Facebook Inc (NASDAQ:FB) looks like the fiscally responsible company that it actually is despite the criticisms.

The article When Tech Upstarts Battle Titans, Money Becomes a Major Issue originally appeared on Fool.com and is written by Daniel Cawrey.

Daniel Cawrey has no position in any stocks mentioned. Follow Daniel on Twitter @danielcawrey. The Motley Fool recommends Facebook and Salesforce.com. The Motley Fool owns shares of Facebook and Oracle. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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