Oracle (ORCL) saw a rise to fame in the 90’s offering its world-class database management system Oracle RDBMS. However, since the dot-com bubble, Oracle has seen ever-increasing competition, a late entry into the cloud, and outdated software models weaken its market position and limit revenue growth.

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Oracle: Low Revenue Growth And Excessive Buybacks Have Pushed Oracle Out Of Competition

Seeking Alpha

Low Revenue Growth And Excessive Buybacks Have Pushed Oracle Out Of Competition

Summary

  • Oracle has seen near-zero revenue growth over the past decade. The firm needs its new database and cloud model to replace its declining hardware sales.

  • Share repurchases have been a leading theme with Oracle repurchasing 40% of its stock since 2011, although mostly using debt, causing liquidity issues.
  • Oracle has seen significant growth in competition, both IaaS and SaaS, primarily through the rise of the cloud.
  • I see limited short-term opportunity for investors who would be better placed investing into some of Oracles competitors.

Oracle (ORCL) saw a rise to fame in the 90’s offering its world-class database management system Oracle RDBMS. However, since the dot-com bubble, Oracle has seen ever-increasing competition, a late entry into the cloud, and outdated software models weaken its market position and limit revenue growth. Oracle has been binging on share repurchases spending $70 billion since 2018 just on buying its own stock accounting for almost all of the 75% increase in its share price in the last decade. Oracle has been using significant amounts of debt to finance these buybacks pushing its net cash negative and forcing rating agency downgrades. This could be forgivable if the company showed revenue growth, although Oracle has seen revenue flatline for the whole of the 2010’s. Oracle’s one shining hope is its new autonomous database, which has showed promise although its early days. Investors will find little value in investing in this relic of the tech world, while its competitors provide much more lucrative investment opportunities.

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