Oracle Changes Its Tune About the Cloud, Saves Stock Despite Sales Decline

The cloud is here to stay.  A hard pill for Oracle to swallow, but a necessary one indeed.  The database giant saved its stock prices with news of its cloud strategy, regaining investor interest despite a 24 percent decline in Oracle’s hardware business.  There’s been a bevy of cloud service providers layering convenience and low prices with a business model quite different from Oracle’s.  Many are going public, including old rival David Duffield, the man behind the cloud startup Workday.

Oracle made a profit of $2.03 billion or 53 cents a share, up 11 percent from last year and on par with analysts’ expectations, on revenue of $8.18 billion.  Sales declined 2 percent year-over-year, in large part due to a 24 percent decline in the company’s hardware business, but that didn’t stop Oracle’s stock from shooting up in early morning trading today.  Several brokerages that follow the stock also raised their share price targets.

The reason behind this optimism is that, while Oracle may not be doing that well overall, the Q1 results validate that the firm’s shift to cloud technology and higher-end datacenter appliances (namely the Exa portfolio) is working.

“Oracle is pinning its growth on the cloud and saying, for example, the vast majority of its demand for HR software is for its cloud-based offering,” said Dave Vellante, co-founder  of The Wikibon Project. “The problem for Oracle is company’s like Workday are far ahead in that space and provide a superior offering with more cloud chops. But Oracle is no slouch when it comes to catching up, and will use its checkbook to compete.”

Oracle is shifting its focus away from the lower-end hardware line-ups that it absorbed through the acquisition of Sun, and those recent acquisitions make up the reasoning behind this move. The most notable buys from earlier this year were Taleo and RightNow, investments that the company has recently reinforced with the acquisition of SelectMinds, yet another provider of cloud-based HR software.

Oracle is going to have to prove that its strategy is sustainable in the coming quarters. Right now however, one of the top items on the agenda is the freshly filed counter-suit that the company launched against  Advanced Dynamic Interfaces.  In the original case ADI made claims that the APEX framework used to develop apps for Oracle systems infringe ond its IP.