At the time of this writing Oracle has a market cap of 195.44B its price is 48.58 it has a Price to earnings ratio of 18.92, it has 67 Billion in assets. If you look at the financials it seems healthy. It has 67B in assets and 21.6B in cash on hand.
Revenue 11.25B 3.3%
Net income 3.41B 5.41%
Diluted EPS 0.82 7.89%
Net profit margin 30.28%
If you look at the cost of revenue, you notice an upward trend. Aug 2017 1.93 B, to May a total of 2018 2.18B. You'd think all the cost cutting MH has in place would reduce the cost of revenue, but its gone up. That is another topic.
What I'd like to talk about is the shrinking cash on hand and the stock buy backs in the midst of a shrinking market share, with no new markets and no new products. This is how I believe Oracle will die, its spending money on doing nothing more than maintaining its stock price. In August of 2017 Oracle's cash on hand drop 25% to 21.32 billion. In may of nearly a year later 2018 it hasn't gone up by much at all its still at 21.62B.
What is going on? Oracle : Approves Second $12 Billion Stock Buyback Authorization in as Many Months...
https://www.marketscreener.com/ORACLE-CORPORATION-13620698/news/Oracle-Approves-Second-12-Billion-Stock-Buyback-Authorization-in-as-Many-Months-25922231/
Apple, Microsoft and Oracle were among the top 10 largest non-financial borrowers in the market last year, issuing both short-term and long-term debt, data compiled by Bloomberg show. This year, none of the three has sold bonds. Representatives for Apple, Oracle and Microsoft declined to comment.
As for the interest rates on the debt, the days of borrowing for virtually nothing are in the past, analysts say.
“I don’t see front-end selling by corporate treasuries changing anytime soon,” said David Knutson, head of credit research for the Americas at Schroder Investment Management. The front end of the so-called credit curve, he said, “will never be the same.”
https://www.bloomberg.com/news/articles/2018-08-31/apple-oracle-dump-bonds-and-create-300-billion-hole-in-market
In november of 2017 Oracle Corp. ORCL, +0.41% tapped the corporate bond market Tuesday with a deal expected to total about $10 billion, according to research firm CreditSights.
Oracle is borrowing money to buy back its stock and its paying interest on that money to do so. @1 Billion sound like a lot of money, until you realize you just burned through more than half of it buying your own stock to prop it up. Oh... and you borrowed that money with interest....
Oracle has failed miserably as a hardware vendor, Sun is officially dead and forgotten. After years of declaring cloud as "Nonsense" the oracle executive jump on board and declare they have the best cloud ever. If you look at comments made by executive management they saw cloud as nothing more than hosted solutions. Oracle had the least successful most expensive hosted solutions a decade ago. Sound familiar? Oracle now has the most expensive and least successful cloud solution. I'd expect the same success rate.
Sep 28, 2009 - "It's this nonsense. What are you talking about?" Ellison nearly shouted. "It's not water vapor!. All it is, is a computer attached to a network.
Right... and this is what Oracle is most proud of? Until 2018 it had only a handful of rented data centers. Now its investing in 12. With what? All of their money is going to buy back stock, to prop up the price.
https://www.recode.net/2018/3/15/17124300/google-amazon-microsoft-cloud-200-percent-jump-data-center-acquisitions
Google, Amazon and Microsoft are spending big money to buy data centers for their exploding cloud businesses.
Cloud companies and data center providers altogether spent a record $20 billion in 2017 buying properties known as data centers that house computer servers. That’s more than the three previous years combined, according to a new report by real estate company CBRE.
These data centers power the mobile phones, websites and driverless cars that are becoming more important to everyday commerce and tech development.
Microsoft’s, Google’s and Amazon’s rapidly growing cloud businesses have contributed to the jump in data center investment. Barely three months into the year, more than $4 billion has already been spent on data centers in North America, according to CBRE. That puts 2018 on track for more than $20 billion.
20 billion is a lot of money. Here is a quote from and Article dated Aug 9 2018.
For the trailing 12 months, such spending has totaled $9.63 billion, which represents a moderate 20% increase from the prior 12 months.
This year Amazon spent 9.63 Billion on cloud infrastructure. Oracle spent 12 Billion buying back its own stock. In the mean time SC, MH and LE sell a million shares a piece on August 2nd 2018. Nothing to see here, its "normal" activity. The execs just dropped 3 million shares at about 48 dollars a share for a cool $144,000,000.00. Hey look its just 144 million dollars, no big deal.
https://www.nasdaq.com/symbol/orcl/insider-trades
This is amidst allegations of cloud fraud, about six weeks before the Q1 earnings call. To be fair its pretty normal, as the executive have been selling like that all the time for the past few years. MH and SC have about half their shares left.
Whats the point? Q1 earnings call is coming. Oracle customers are pretty much held hostage until they can figure a way to migrate off of the old legacy Oracle products. Q1 will show a modest dip in earnings, but by and large be OK.
What wont be OK is a serious inquiry by shareholders on the cloud revenue numbers. That little story has come full circle. Be sure to tune in. In two weeks time I think that bomb may drop. With the lawsuits and the SEC looking on, there will be little room for "exaggeration" or "posturing." I'm sure there will be some pat answers and a strong push by the Oracle executives to sweep these questions under the rug.
No matter how you look at it the Market will not respond in a favorable fashion. Oracle may use the opportunity to borrow more cash to buy back stock. This dilutes the real value of cash on hand. Just looking at the 12 billion stock buy back, and the 10 billion in bonds there are at 50% of their liquid assets. And if they do this again they will have borrowed against 100% of their liquidity.
That's dangerous. What assets can they sell, if they have no cash on hand? Anyone want ownership of people soft? Anyone want to buy the Siebel Customer base? What does that signal to the market? Oracle is nothing more than collection of legacy technologies. It is a company too late to cloud, with too little investment in the cloud. It has missed the boat, worse it has lied about it to the investors.
All this and more will be brought to light in two weeks. The only question I have left is exactly how fast will Oracle die? I think its about to set a record. I just hope its contained to Oracle. It would s--- if Oracle tumbles and causes a broader market collapse.
https://www.advisorperspectives.com/dshort/updates/2018/08/02/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator
Best of luck! I'm predicting a beat down for Oracle, and some serious cost cutting to reduce the Cost of revenue. From above:
If you look at the cost of revenue, you notice an upward trend. Aug 2017 1.93 B, to May a total of 2018 2.18B. You'd think all the cost cutting MH has in place would reduce the cost of revenue, but its gone up.
The biggest cost of revenue is the Employee cost. Shame on you MH. How can this happen? Isn't this your calling card? Isn't what you do best reducing the cost of revenue? My guess is good old MH is sharpening his hatchet right now.