Oracle's Results Weren't So Bad, After All

Shares of enterprise software giant Oracle are falling this morning after the company reported earnings that beat expectations, but included a weaker-than-expected outlook for the quarter ahead.

Oracle shares fell by nearly one percent, to $33.60, as of 10:20 am ET.

The company's results have been uneven for the last few quarters, as demand for corporate IT products has slowed in recent years. As president Mark Hurd put it on a conference call with analysts, Oracle is muddling through a weak-demand environment along with everyone else: "We read all of our peer groups' results. And to be very blunt, they're not very good. So depending on who you're talking about, most of their numbers are negative."

Part of the problem with the outlook was that it was a tough comparison. In the second quarter last year, new cloud revenue grew by 18 percent, an unusually high rate, so it makes meeting the results - let along beating them - kind of difficult. As CFO Safra Catz put it, "this will be a very, very tough comparison ... Our sales leaders remain very careful about what they are forecasting to us."

Even so, it wasn't such a bad quarter. In fact, as Stifel Nicolaus analyst Brad Reback put it, it was kind of good. Software sales remained solid, he said, making the quarter's results and its outlook not so bad after all.

Revenue from new licenses was at nearly $1.7 billion, ahead of expectations, and that was despite a currency headwind that was twice as bad as expected. Added to that, there was healthy demand in, of all places, the government-spending sector. "We think that some of the changes the company made over a year ago are finally starting to take hold," Reback said.

Hardware revenue remained, as Reback called it, "a sore spot." As the dwindling business of selling older hardware dragged down hardware sales, the "Exa" family of "engineered systems" gained traction with some customers, but at the lower-priced end of its range. "Although we still think this business has the potential to be a modest grower, we don't expect that to happen until at least fiscal year 2015," Reback wrote.

Overall, he thinks that Street expectations for Oracle's second fiscal quarter were unrealistic to begin with: "We think the company has addressed many of its recent sales execution issues and should benefit from its immense pipeline, improving sales productivity, and numerous new products, over the next several quarters."

Oracle Taps Adrian Jones to Head Asian Operations (Read the Memo)

Software giant Oracle named Adrian Jones to head its operations in Asia. The move was announced in an internal email from Oracle president Mark Hurd, obtained by AllThingsD.

If the name sounds familiar, it may be because Jones (pictured) is a former Hewlett-Packard exec who was sued by that company in 2011. HP had alleged that Jones stole trade secrets and shared them with Oracle. The suit dates back to one of the more rancorous periods in the relationship between those companies, and the aftermath of the days when Hurd, who was for five years the CEO of HP, joined Oracle following his surprise resignation in 2010. (That situation, you'll recall, spurred its own legal merry-go-round.)

In a lawsuit filed in the California Superior Court in Santa Clara County, HP had accused Jones of copying sensitive files concerning its strategic and financial plans, plus other information, to a USB drive, and not returning them when he resigned from the company. Among other things, lawyers for HP had sought to examine every electronic device Jones owned, including phones and iPads belonging to his girlfriend.

It later turned out that the copying of the files in question didn't take place at the time that HP originally said it did, but during a period when the computer Jones used was in the hands of HP's corporate security office. Talk about awkward.

Since then, the case has been forgotten. HP was eventually forced to withdraw the case against Jones entirely, according to people familiar with how it all turned out. Neither HP nor Oracle would confirm that, however. Entries in the case-record file on the court's website make vague mentions of a dismissal that occurred on July 30, 2012.

The case against Jones was one of many HP filed during a period when Michael Holston was its general counsel. Remembered as a key aide to Hurd during the years he was running HP, Holston remained HP's general counsel during the 11-month tenure of former CEO L o Apotheker, but was among the first members of HP's executive council to leave the company after Meg Whitman became CEO.

Anyway, enough with the legal footnotes. Here's the memo announcing Jones' promotion:

From: Mark Hurd
Date: July 24, 2013, 2:00:02 AM PDT
To: Oracle Asia Pacific Sales

The business across Asia Pacific represents a significant opportunity for Oracle. We continue to invest in this region and it is poised for growth.

I am pleased to announce Adrian Jones to the position of General Manager and Senior Vice President, Oracle Asia Pacific. Adrian will lead the region for hardware and software, and be responsible for accelerating market share, revenue, and margin growth.

Adrian has strengthened our Systems business and has held senior leadership positions across the IT industry for more than 20 years. Before joining Oracle, he held the position of Senior Vice President of Enterprise Servers, Storage and Networking for HP Asia Pacific and Japan. He has in-depth knowledge of these markets.

I would also like to take the opportunity to thank Steve Au Yeung for his contributions to Oracle. Steve is leaving Oracle, and we thank him for his five years of leadership and wish him the best in the future.

Mark

Why Wall Street Should Care About Marketing Data

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Today's CMOs are making major investments to reach their target audiences across dozens of touchpoints - on their own websites, through search, display advertising and email, and increasingly on social channels and mobile devices.

The problem is, most of the technology platforms marketers are using to accomplish this don't talk to each other.

What's more, many of the groups within the organization running these programs are just as siloed. This means that the things marketers learn about customers in one channel often don't translate into sound strategy decisions for other channels.

I'll give you an example. Today, if someone clicks on a display ad, reaches a landing page and fills out a form, the CRM or marketing automation system can capture that lead and track that it came from display advertising. What marketers can't yet do is take advantage of the information exchange in the opposite direction. What if they could use the rich information stored in the CRM system - such as how far along a prospect is in the sales pipeline - to make the display ad creative and messaging more relevant?

Marketing executives know they need to get their systems and people to talk to each other. In fact, a new study by Accenture Interactive, "Turbulence for the CMO," reveals that 70 percent of top CMOs think they have five years to fundamentally overhaul their companies' corporate marketing operating model to achieve competitive success. Big marketing technology companies know this too, and it is why companies like Salesforce, Oracle and Google are duking it out to own the customer data and CRM system. They want to be at the center of the value created by unlocking this marketing data and getting at an integrated view of a prospect or customer.

Think about how powerful it would be to serve up personalized Web content based on the ads someone has previously been exposed to, events they've attended, or when they've most recently engaged with a sales rep, or, to easily target email or display ads to just those people who engaged with a social campaign.

One company in particular has built a business around this very concept: Amazon. Amazon.com might very well be the most sophisticated marketer on the planet today, and if you spend a few minutes on their site looking at products, you'll notice that the follow-up emails you get, the next experience you have on the site and even the display ads you see will all be synched to your product searches and prior browsing history - all to help you convert. Amazon is far ahead of the pack, with very few keeping pace today.

As companies get better at integrating their marketing systems to more fully understand the customer journey - from first exposure to the brand to the last program that drove the sale, and every touchpoint in between - every marketing dollar spent becomes extremely efficient.

And it's a lot of dollars at stake. According to research by Outsell, B2B marketers alone will increase their advertising and marketing digital spend by almost 11 percent to $65.9B in 2013. Imagine the bottom-line impact when the performance of these investments improves by five percent or 10 percent - just by having the left hand talk to the right.

As companies use data to optimize their digital tactics - whether it's through better targeting, reaching people where they are consuming media or tying together all the pieces of the marketing funnel - they'll inevitably achieve a step-function in efficiency in terms of deploying marketing spend for impact. They can then cycle the additional revenue back into marketing, or R&D, or more salespeople.

And this is where Wall Street comes in. Wall Street should care about marketing data because companies that do the best job of tying together and leveraging marketing data will ultimately win and create outsized shareholder value.

So how can you tell if a company has a data-savvy CMO? Look for clear evidence of marketing integration.

It's actually pretty amazing how many large companies have yet to integrate their marketing tactics. Investors should be looking to see, for example, if a company has a Super Bowl TV spot that they're also using search ads and display ads to reinforce the Super Bowl message. The company should also be previewing the ad online to test customer response and drive viral awareness before the TV ad ever launches. Companies that only have a single spot and don't back it up (and there are lots of them!) aren't communicating effectively across the organization nor are they maximizing returns on invested capital. This is likely a good indicator that other programs are not well integrated either.

Another great way to test for marketing integration is simply the relevance of the ads you're seeing. If they are relevant, and improving over time, the company is likely making the right investments in marketing technology to be ready for the next 10 years of growth. If you still get the same untargeted direct mail piece that you throw away every week, there's cause to be concerned.

There are a lot of reasons to be bullish about the economy and the stock market over the next five to 10 years. Look no further than the innovation beginning to hit the CMO's office to help decide if you agree, and if so, how to find leaders to invest in.

Russell Glass, CEO of Bizo, is a serial technology entrepreneur, having founded or held senior positions at four venture-backed technology companies. Prior to Bizo, Russ led the marketing and product management teams at ZoomInfo, a business information search engine, where he sharpened his B2B marketing skill set and developed his love for business data.

Nearly a Year After IPO, Workday Appears to Be Working Out

It has been nearly a year since Workday, the cloud-based human-resources software company, first debuted on the New York Stock Exchange. On Tuesday, it will report its quarterly results after the markets close, and that makes this as good a time as any to check up on its performance.

Having opened at $47.05 on its first day of trading, Workday shares have risen by 61 percent since then, closing Friday at $75.76. Sales have been rising, too. In its quarter ended in April, sales rose by more than 60 percent versus the year-ago period. Subscription revenue, a key metric for cloud companies who charge their customers on an ongoing basis, was north of $68 million - up by more than 85 percent.

That sets up some high expectations for the current quarter and the year ahead. In a note to clients out today, analyst Brad Reback of Stifel Financial in St. Louis said Workday looks "poised to deliver another strong quarter."

Even so, on paper, it's still not making a profit. On a non-GAAP basis last quarter, Workday reported a net loss of 15 cents a share.

You can say that's okay for a relatively young company, which Workday is, but it's also typical of companies in the cloud software business. The best-known cloud company, Salesforce.com reported a net loss on both its 2012 and 2013 fiscal years, and that company's CEO, Marc Benioff, has argued that the time was right to invest aggressively in winning new customers and to expand into related lines of business, like marketing software.

Reback expects Workday to report a loss this quarter, as well. He's looking for a 17-cent-a-share loss on a non-GAAP basis, which is slightly better than the 18-cent loss predicted by the consensus view of analysts surveyed by Thomson Financial. He expects sales to come in slightly above the $100 million mark, and billings to be $125 million.

"Based on our recent channel checks and conversations with customers, we believe demand for the company's solutions remains solid and there is a healthy possibility it delivers some potential upside to our results," Reback wrote.

That said, the share price may have gone as high as it's going to for now, as most of the good news about Workday is already "priced in" to its share price. At $75.50 a share, the company is trading at a valuation of 17 times estimated sales for 2014 of about $440 million. That's a much higher multiple than other cloud companies, which trade at less than six times forward revenue.

"We believe at current levels the stock is pricing in a lot of good news and with any missteps could see a healthy pullback," Reback wrote.