Oracle Corporation (ORCL): What This IT Bellwether’s Results Mean to the Market?

Moreover Oracle is facing some operational challenges as it shifts revenues towards cloud-based solutions. It described its SaaS (software as a service) based revenues as having a $1 billion run rate. This is fine but to put it into context its full year revenues are closer to $37 billion. In addition some cloud-based companies like Rackspace Hosting, Inc. (NYSE:RAX) have reported some weakness as enterprises still seem keen to use any excuse to withhold IT spending. In fact in its last quarter it declared that its revenue per server declined to $1,308 from $1,310 last year. This is not a good sign for a company supposed to be in a high growth phase. In Rackspace Hosting, Inc. (NYSE:RAX)’s case it was partly due to customers delaying purchases of legacy systems while they appraised its new OpenStack public cloud offering. Rackspace also has increasing competition from the likes of Amazon Web Services (who has been cutting prices) and I take this to be another sign that conditions have weakened in technology in 2013.

With regards to Oracle’s direct competitors like International Business Machines Corp. (NYSE:IBM) and SAP AG (ADR) (NYSE:SAP), these results are obviously not great news and they got marked down in sympathy. Moreover Larry Ellison was quite candid on his view that SAP’s Hana database was ‘virtually never’ seen in the market and even referenced some large German industrial companies that had bought Oracle’s rival Exadata database machine in order to run SAP’s applications. He also suggested that Hana could never successfully compete with Exadata. Frankly there is no love lost between SAP and Oracle, even when it comes to yachting, and this sort of comment has been heard before. Moreover I think SAP AG (ADR) (NYSE:SAP)’s investors can take some heart from the fact that EMEA (its core market) was a bit stronger than expected for Oracle.

As for IBM, Oracle’s report was a bit worrying. It pretty much reported a similar story to Oracle last time around by blaming things like sales execution, the sequester, the weather and even the change in the Chinese Government. Will it do the same this time? It’s hard to tell but International Business Machines Corp. (NYSE:IBM) didn’t lower its full-year forecast last time around and announced it would take some workflow rebalancing in Q2. All of which will put some pressure on it to deliver in the current quarter. As for the issue with the Chinese Government, did we see signs of this in the weak results that Oracle just reported?