NEW YORK (TheStreet) -- Once again, Oracle
(ORCL - Get Report) missed analysts' earnings estimates, a development that usually sends stocks relling. But not Oracle -- that doesn't even count as news.
Fact is, Oracle's time is evaporating in the cloud. It has a destination, it has a strategy, the company has lots of customers and products, but if we don't get some positive news soon, analysts may give it up as lost and move on. Oracle shares traded mid-morning at $38.47.
Today's Oracle was born from its acquisition of Sun Microsystems in 2010. It sells hardware tied to its database software. With so many key corporate applications tied to that database software, Oracle has a huge captive customer base.
Over the last few years, Oracle has been trying to adapt that software to cloud technology, and turn that hardware into a data center system competitive with Amazon.Com
(GOOG) and Microsoft
It has actually done fairly well. One of its key customers, Salesforce.com
(CRM - Get Report)
, is still considered a major cloud player by market researchers IDC.
Some analysts, like research director Evan Quinn of Electronic Management Associates, continue to believe
Oracle can manage the cloud transition on its own. Most of its cloud migration initiatives are succeeding, he writes, with its biggest miss being its cloud marketplace, bringing in other companies to grow with it as their private cloud vendor.
You know who does that really, really well? Salesforce.com.
Wall Street's problem with Oracle is that it doesn't show the kind of profitable growth this big customer enjoys. Salesforce has been growing revenue by 25% per year, while Oracle's are no longer growing at all. But Salesforce is also pushing investment as hard as it can, losing money three years running, while Oracle now brings one dollar of revenue in every four to the net income line.
Combine the two and Oracle would still have poor growth, but it would have some forward momentum, it would have a viable cloud play, and Salesforce would have a huge capital pot with which to grow even faster.
If Oracle is to make a play for Salesforce, it has to move soon. Oracle still has a market cap of $173 billion compared with Salesforce's $35.6 billion. But that advantage is much smaller than five years ago -- Salesforce.Com's value has grown by more than 600% in that time, Oracle's by just 147%.
Salesforce would demand a big premium in any deal. In some ways it would be a reverse takeover, with Salesforce CEO Marc Benioff overthrowing current Oracle COO Mark Hurd as Larry Ellison's designated successor. Ellison, now 69, is a proud man who tries hard to look 40, but even he knows time is running out, and he may only be able to make one more big play. Salesforce.com would be that play.
All this is just wild speculation, a reporter's game that could become an analyst's ploy if someone else took up the call. Ellison and Benioff feuded for years before burying the hatchet in 2013, announcing a "major strategic partnership"
in which Salesforce standardized on Oracle software.
So Oracle has a choice. It can become an "extractive company," matching the market's growth, paying a small dividend as it began doing last fall. Or it can roll the dice and trade a big piece of itself for the possibility of a brass ring in the cloud.
As I indicated at the start, time is running out. If Oracle continues to wait, Salesforce's market cap will grow to the point where an acquisition becomes impossible. Oracle needs to find itself a viable cloud growth strategy, quickly, if it's going to hold investors' or reporters' interest.
At the time of publication the author owned shares of AMZN and GOOG.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.