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Oracle's Kurian Steps Down From Product Development Post

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Reportedly, Oracle Corporation’s (ORCL - Free Report) president of product development, Thomas Kurian, has decided to step down from his position with immediate effect.

As a result, chairman and chief technology officer Larry Ellison will take up responsibilities, according to the company’s SEC filling. The news came three weeks after Kurian announced he was taking an undetermined leave of absence.

Oracle’s stock has just gained 18.3% in the last one year, underperforming the industry’s rally of 41.8%.

Kurian has been at Oracle since 1996 and subsequently held an array of product-focused jobs in the company. In 2015, Kurian held the position of president of product development for Oracle where he reported directly to Ellison. In his current designation, Kurian aided the company build its cloud-computing business, where it is facing tough competition from the likes of Amazon.com Inc. (AMZN - Free Report) and Microsoft Corp. (MSFT - Free Report) .

According to a Bloomberg report the escalating conflicts between Kurian and Ellison culminated in Kurian’s declaration. According to a spokesman, “the dispute was said to have centered on whether Oracle should make more of its software available to run on cloud computing from chief rivals Amazon.com Inc. and Microsoft Corp. as a way to diversify from its own struggling infrastructure.” Ellison eventually was not in support of this idea.

Over the years, Kurian had successfully steered the company toward growth through tactical initiatives. In fact, Kurian expects the company to be a leader in cloud computing and storage services in future, irrespective of the change in top leadership.

What’s Going on With Oracle

The company had adopted a new Accounting Standards Codification ("ASC") 606 using full retrospective method in the fourth quarter.

The software provider had recently launched a bring-your-own-license (BYOL) program which enables customers to shift their existing on-premise licenses to the Oracle Cloud. In doing so, Oracle claims that licenses covered by the BYOL program can neither be defined as on-premise nor as cloud.

Consequently, the company now reports its new software licenses under its new Cloud license and on-premise license segment. Further, the company merged its Cloud SaaS, Cloud PaaS and IaaS along with its software license updates and product support into Cloud services and license support.

Oracle no longer intends to break out its cloud revenues and does not provide any guidance on SaaS, Cloud PaaS and IaaS. This move is likely to aggravate investor concern about the company's outlook.

The company reported mixed first-quarter fiscal 2019 results. Non-GAAP earnings of 71 cents per share surpassed the Zacks Consensus Estimate of 68 cents. However, revenues of $9.2 billion marginally lagged the Zacks Consensus Estimate of $9.28 billion.

Earnings increased approximately 16.4% from the year-ago quarter (up 19% in cc). Further, revenues increased 1% year over year and 2% in cc which was within management’s guidance of 1-3%.

Oracle Corporation Revenue (Quarterly)

 

To Conclude

Losing a veteran who has played a major role in Oracle is surely a setback for the company.

However, the company is benefiting from strong adoption of its cloud-based solutions. We believe that the company’s growing cloud market share will continue to drive top-line growth in the long haul. We note that partnerships with the likes of Accenture are helping the company rapidly expand its cloud-base clientele. Further, anticipated strong demand for the next-generation autonomous database supported by machine learning will boost competitive position against AWS.

Zacks Rank & Key Pick

Oraclecarries a Zacks Rank #3 (Hold).

Apple Inc. (AAPL - Free Report) is a better-ranked stock in the broader technology sector, carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apple has a long-term earnings growth rate of 9.7%.

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