One of the major challenges that tech bellwether Oracle faces today is the cost of technology at some its rival companies—it’s often less expensive. Peter Goldmacher, analyst at Cowen and Company, told “Big Data Download” that Oracle has been a tremendously successful software company for 30 years, but prices in the industry are getting cheap.
“It’s hard to compete with free, open-source software,” Goldmacher said. “Oracle is stuck defending its legacy business model. ”
“A lot of these competitors have been told very clearly by Wall Street, ‘We don’t care how much money you make, all we care about is how quickly you can grow,’” he said.
While Goldmacher expects Oracle’s software license business to grow 6 percent this quarter, revenue at competitor Salesforce.com grew at almost 30 percent year-over-year. Salesforce.com hasn’t reported an annual profit since 2010.
“In the HR application space, you’ve got Workday, growing at about 75 percent, also not making money, so the dynamic is Oracle is a $35 billion company. They’ve made margin commitments to the Street that they have to meet, while none of its challengers have any margin commitments, nor does anyone have expectation of profitability,” he said. “They just want these companies to get as big as they can as fast as they can, and that’s a very hard dynamic for Oracle to compete against.”
Oracle reports fourth-quarter results after the bell on Thursday. Analysts expect it to report a profit of 87 cents per share.
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