Expanding Section: Oracle a Tale of Two Companies in One

Oracle has often explained as a software company that is consistently a single company, but in fact, Oracle is two companies.

  1. Oracle as a Database Company: One is a database company where the majority of the databases it has sold are over the needs of the buyers (that is some of the database functionality of Oracle is necessary, but only for a minority of the licenses that are purchased).
  2. Oracle as an Application Company: The second is essentially a Computer Associates model for its applications.

Oracle’s model is based upon control which is enabled through a combination of Oracle’s well-respected database, along with an enormous number of acquired applications.

Oracle has more than 340 products which is the most of any software vendor. Much like other mega software vendors ranging from SAP to Salesforce to IBM, Oracle does not so much develop new products as it simply acquires them.

Why Isn’t Oracle A Story of Three Companies?

When Oracle acquired Sun Microsystems, they acquired Sun’s hardware business. This business had been in decline for years as commodity hardware had been putting pressure on Sun’s server business. Larry Ellison thought that the trick would be to combine Sun’s hardware with Oracle software into “appliances.” The premier example of this being Oracle Exadata, which is a server purpose-built to run the Oracle database. However, we don’t consider Oracle’s hardware division to be the third leg of Oracle, because Oracle’s hardware strategy has failed. Every year, Oracle’s hardware division declines and their hardware becomes increasingly niche, and this looks to only continue. Our view is that Oracle’s hardware division is a distraction for Oracle, and this is supported by the revenues of Oracle’s hardware division.