Oracle Cloud, he said, will "have the same pricing as Amazon.com (AMZN) - Get Report or any other infrastructure provider." Oracle is also selling its software, and applications built with it, on Amazon's cloud.
The problem is that Oracle Cloud isn't cloud. Real clouds cost less to build and manage than Oracle Cloud, and the cost difference keeps growing because real clouds are built with commodity hardware and software.
Oracle has been fighting this trend since it started. It bought Sun Microsystems in 2010 and launched its own line of hardware as the momentum of cloud was becoming obvious.
Oracle stock has barely moved this year. The current price of $38 a share is just where it was in January. It has also failed to match the S&P 500's gain of 86% over the last five years, coming in at 83%.
This failure has been obscured by the success of Oracle partners. Salesforce.com (CRM) - Get Report , whose software is based on that of Oracle, aligned itself completely with Oracle last year. Salesforce's stock price has more than tripled over the last five years. Netsuite (N) , which Ellison helped fund, is up over 500% in five years, and is also aligned with Oracle. That's a much better performance than what was achieved by other big tech stocks, even better than Amazon's.
But it's a numerical trick. Salesforce.com and Netsuite are both growing from a much smaller base. As they have grown their momentum has slowed. In 2014, Salesforce stock is up just 3%, a performance similar to Oracle's own, while Netsuite is down more than 15%.
A true cloud is built with commodity hardware, commodity software and self-service applications -- not proprietary, managed applications. So Amazon runs a cloud. Google (GOOG) - Get Report runs a cloud. Even IBM (IBM) - Get Report , Hewlett-Packard (HPQ) - Get Report and Microsoft (MSFT) - Get Report run clouds. Oracle, not so much.
Reporters who cover the cloud for a living keep repeating that what Oracle is selling isn't cloud, but a proprietary software stack managed through its own hardware. Using a cloud should be as easy as setting up a document in Microsoft Word. Oracle's applications still require proprietary software.
By appointing himself chief technology officer while retiring as CEO, Ellison made certain new Co-CEOs Mark Hurd and Safra Catz would keep repeating his claim that Oracle has "cloud supremacy" when in fact what it has is a collection of powerful applications built on a proprietary base.
Ellison may be able to fool himself that he's running a cloud. Hurd and Catz may be able to keep convincing customers that they've bought cloud, as the cost of switching off Oracle software, to true cloud platforms, keeps rising year after year.
But in the long run, the economics of the cloud are against it.
At the time of publication the author owned shares of GOOG, GOOGL, and AMZN.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates ORACLE CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ORACLE CORP (ORCL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, revenue growth, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
You can view the full analysis from the report here: ORCL Ratings Report