
Warren Buffett Joins the Crowd Struggling to Understand Oracle - partingshots
https://www.bloomberg.com/news/articles/2019-02-26/buffett-joins-crowd-struggling-to-assess-opaque-oracle
======
andyjohnson0
Related discussion from four days ago:
[https://news.ycombinator.com/item?id=19289583](https://news.ycombinator.com/item?id=19289583)

------
fernandopj
I've worked with a public company whose stack is Oracle services. Pretty much
every company on that field is Oracle as well, that explains (to me) much of
how is Oracle's customer base: this field has been under Oracle & Java
database->bus->services->cms since forever, why would one company start and
not hire them to have access to the same features, be able to grap a few
engineers, and skip "reiventing the wheel"?

What this company (and every other in that field) is doing: moving small,
microservice-able tasks to AWS. Scale and costs are way cheaper. But it's a
very long-term move: a couple of years pass and bam!, here's another Oracle
multi-million extension contract they must pay to continue to have the lights
on. But to the executive's perspective, this is just the cost of doing
business in that field, it's the same for the competition. You could argue
this is the same "no one ever got fired for hiring Microsoft/IBM" mentality.

Oracle stack is obsolete, but as a business they aren't, simply because it
will still take a very long time until most companies reliant of their stack
be able to move out without great risk to core business.

~~~
tabtab
Oracle blew a great opportunity. Internal CRUD apps developed by Oracle Forms
worked pretty well, were quick to make, had a well-fitting CRUD-centric
programming API, and did the job. Even though they were ugly and visually out
of style, they made CRUD easy. Our Forms developers were about 4x more
productive than our MVC devs. The MVC devs can put all kinds of fancy-dancy
JavaScript widgets on pages that dazzle users, but they are always breaking.

But then Oracle moved their Forms client to Java, creating all kinds of
versioning headaches and security risks. They should have stuck with the
dedicated stand-alone EXE Forms client: a kind of GUI browser. It was a very
practical tool for in-house and specialty apps, but Oracle ruined it with
Java.

------
anoncoward111
As a former Oracle employee, it's easy to see Oracle's shitty business model--

"Extort everyone for obscene license fees because we currently can, and force
them to buy cloud credits they'll never use because Amazon."

~~~
swarnie_
Oracle consultant here.

There's nothing more disheartening then digging into an issue on a new site
and realizing someone checked (or didn't uncheck) a box during install years
ago and the system is not complying with its licensing.

The licence fees for small features you might not even know your using can be
pretty brutal.

~~~
tabtab
Reminds of those "free" software install dialogs that did everything they
could to trick you into installing extra spam-ware using double negatives: "Do
you _not_ want to skip installing the _Great Deals_ browser tool-bar?"

Microsoft got into similar hot water tricking people into installing Windows
10 via confusing dialog boxes.

~~~
sombremesa
I won't not never uncheck a box that isn't unlike that one.

~~~
majewsky
I think what you were meaning to say is that you won't _never not_ uncheck
said boxes.

------
jaclaz
Well, the quote by Warren Buffet is IMHO great:

>“Larry Ellison has done a fantastic job with Oracle,’’ Buffett said Monday in
a CNBC interview. “I’ve followed from the standpoint of reading about it, but
I felt like I didn’t understand the business. Particularly after my experience
with IBM, _I don’t think I understand exactly where the cloud is going._ ’’

~~~
sametmax
When Buffet thinks "this is BS, I won't touch it", he says politely "I don't
understand". He's been repeating it for 40 years.

He doesn't want to fight. He doesn't care about being right in the eyes of
others.

I stole this line 10 years ago to decline the invitation "oh, you are a
programmer, can you take a look at my computer ?". I don't understand Windows
so I can't, because I use Linux. Declaring yourself incompetent is a fantastic
social cheat code.

~~~
duado
I do even one better to get out of doing IT work. If someone random asks me to
do computer maintenance I profess my incompetence but say that I’ll give it a
try. I just go into settings and make the problem one epsilon worse. Then I
give it back and say “ugh I don’t know what I did, I just [disabled the
network adapter] but now it won’t even open the WiFi menu.” Gives them enough
information to reverse what I did but makes sure they never ask me again.

~~~
roymurdock
seems pretty malicious

why not just ask them to pay you for your time, or else say sorry you need to
hire a professional instead of giving them more grief

~~~
justwalt
Last week my mother called me after she broke down on the side of the road. So
I popped her hood, broke her timing belt, then sped off.

Have to agree with you, seems fairly pointless to kick someone while they’re
down. Computer problems are stressful, so it’s not surprising someone would
ask the first person they know is remotely involved with computing for help.
It’s very easy just to tell someone a few things that they might try googling.

~~~
magduf
>It’s very easy just to tell someone a few things that they might try
googling.

That seems to frequently be perceived as an insult though.

For some reason, everyone thinks that "computer people" can be counted on to
solve their Windows PC problems for free, though they wouldn't ask their
relative who's a car salesman to fix their car.

~~~
jeffdavis
Setting boundaries and knowing when to bend them a bit is a skill everyone
needs to have. So is understanding and respecting others' boundaries.

~~~
magduf
It's a good skill, yes, but you can't expect everyone to be good at it (just
like anything), and I think it's a lot worse when you're dealing with family
members.

I don't have an actual solution here, I'm just pointing out that this seems to
be a common problem.

------
adventured
There's minimal need to understand their $40 billion in sales. Do they have
growth or not, and what is the quality of the growth in producing profit. It's
that simple ultimately.

Sales 2014: $38.2 billion; sales 2018: $39.8 billion

No growth beyond inflation. Net income hasn't climbed (roughly stuck at $9-$10
billion for the last five years). Annual debt interest costs have more than
doubled to $2 billion as they've made a mess of their balance sheet.

In two years AWS will be as large as their entire business.

In the five years Oracle has seen zero growth, Salesforce has gone from $4b to
$10.5b in sales. It's likely that over the next five years Oracle will again
see near zero growth and Salesforce will double in size.

Here's what a successful cloud transition with growth actually looks like:

Adobe's business was stagnant for years. Then.... Sales 2014: $4.1b; 2015:
$4.8b; 2016: $5.8b; 2017: $7.3b; 2018: $9b.

Their profit skyrocketed from $268m in 2014, to $2.6b for 2018. They earned as
much last quarter as they did for all of 2015. The stock has gone from $60 to
$250 / share.

You can tell exactly how well Oracle's cloud transition is going by the fact
that everybody around them is eating their lunch and seeing growth, from AWS,
to Microsoft, to Salesforce, to dozens of other enterprise software companies.
Microsoft had watched its top line stagnate for several years as they
struggled to find new growth. And then suddenly a big jump: $96b in sales, to
$110b in sales, over the prior year. Another example of cloud transition
growth in action.

~~~
spdionis
While your post is informative and I agree with it I can't see an argument
that showcases why Oracle would not have the same exact jumpin the next few
years like Microsoft and Adobe had.

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voidhorse
Yeah, idk. I used to work at Oracle and from what I could discern (as a pretty
low-level employee) Thomas Kurian was largely responsible for spearheading the
cloud efforts on the technical side of things. He's since left the company.

I worked with great people at Oracle but I disliked working there immensely.
Compared to a lot of other big-name tech companies, their approach to managing
employees and their approach to innovation is extremely outdated and somewhat
draconian (in certain arenas). Furthermore, I got the sense that any customers
we had were largely the result of good salesmanship and unforgiving lock-in.
I'm sure it's probably not like this on every team at Oracle, but that was my
experience. It was also incredibly clear from the scarce (once a year? if
that?) corporate wide pow-wows and communications from above that the
company's top executives not only don't understand their employees but also
quite clearly don't care about them, their advancement, or happiness. Hell,
Oracle was _just_ starting to bring macs into the workplace in the name of
appeasing employees and improving employee-executive relations when I left in
early _2018_.

------
redleggedfrog
That's pretty easy. If Oracles numbers for cloud were awesome they'd certain
disclose that. Since the don't we can safely assume they're struggling and
want to hide it.

------
ahartmetz
Yeah, I've been scratching my head, too. Oracle's P/E ratio implies the
expectation of great growth, but to me Oracle looks kind of floundering with
competition from F/OSS databases and all the failed acquisitions / new lines
of business such as "cloud".

I would short Oracle if the overvaluation wasn't so old and stable. Hard to
guess if or when it will end.

~~~
chollida1
> Oracle's P/E ratio implies the expectation of great growth, but to me Oracle
> looks kind of floundering with competition from F/OSS databases and all the
> failed acquisitions / new lines of business such as "cloud".

Umm, ORCL's PE is currently 18.7 and the average PE of the S&P 500 is
currently around 21 so your statement about a PE that is pricing in "great
growth" is dubious at best:). The average S&P 500 PE ratio is also above 18 if
you start at a reasonable date of say 1980..

[http://www.multpl.com/](http://www.multpl.com/)

~~~
ahartmetz
Yeah, looks like I misremembered the degree of overvaluation. That said, you
have to compare it to valuations of dividend stocks (~15 - Apple, uh... OK,
difficult. McD's, Procter & Gamble 25?!, Ford 10...) and growth stocks (~25 -
Google, Microsoft, Facebook). Oracle is more of a shrinkage stock IMO...

------
ProAm
The head scratcher is no one likes being an Oracle customer. I've never met
one.

~~~
giardini
They apparently like it better than being a IBM DB2 customer or a Microsoft
SQL Server customer or a Sybase customer or a Teradata customer or a ...[I
think you get my point].

Oracle is good at extracting the maximum profit from their sales. They're
aggressive about sales and policing usage and they don't often cut customers
slack. They've learned that clients will try to give them the shaft and they
do their best to not get shafted. They're good capitalists as well as the best
database developers in the world.

~~~
okmokmz
>Oracle is good at extracting the maximum profit from their sales. They're
aggressive about sales and policing usage and they don't often cut customers
slack.

Sounds like a horrible company to work with. Most of the people I know that
use Oracle services/products due so because they are stuck with them

~~~
giardini
Most of the people you know that use Oracle would likely quit if their CFO or
CIO came in and told them to migrate away from Oracle. Oracle's stuff works
and works right. Furthermore, expertise on Oracle tools is well-compensated
and consequently it is common for Oracle expertise to leave for higher-paid
jobs (also using Oracle) should a firm cease to use Oracle.

My point is that, despite a proliferation of free and open software, companies
still often _pay_ for good software that works correctly. And Oracle extracts
their pound of flesh w/o taking a single drop of blood. Oracle's is a very
strong business model that is no accident and results largely from having no
peers.

------
dalbasal
Realistically, a lot of "tech giant" business models are somewhat weird.

Google is a search engine + search engine monetisation engine. They have some
third parties participating in the ad market (notably other search engines)
and some non-search properties (eg YouTube) that contribute some as revenue
but search+AdWords is still the core.

Meanwhile, most of the notable things google do are in unrelated or marginally
related to the business model. Android, chrome, self driving cars...

It's as if most of the company has nothing to do with the business. They used
to explain this with a VC metaphor, but that seems to be gone.

FB & twitter are even stranger. Why do they have 100X more employees and costs
than they had a few years ago, while not apparently outputting much more than
they were outputting before. They're still "just" social media sites. With all
due respect to ad-tech and content ranking algorithms...

The common denominator is a revenue stream that comes from dominating a niche
and very little relationship between what the company invests in and how it
makes money. They didn't/couldn't have actually directed themselves towards
those things as goals.

Oracle is similar. They're deeply embedded in their customer's businesses.
That means a captive market. This generates a revenue stream. There's no
predictable way of turning that revenue into a cloud service, no matter how
much they're willing to spend.

Ultimately, the problem is that the market as a whole is overfunded. Investors
don't want dividends, so they get highly speculative/dubious investments
instead.

~~~
iwintermute
Alphabet (and not Google) is actually trying to be like berkshire hathaway -
conglomerate holding company (at least according to Eric Schmidt)

------
snarfy
As a US citizen I do not want a single cent of tax dollars going to Larry.
It's infuriating the US government is Oracle's biggest customer.

~~~
dmix
Same with IBM. I just read the Canadian prime minister _praising_ the work
done on a new payroll system, so I decided to look it up:
[https://en.wikipedia.org/wiki/Phoenix_pay_system](https://en.wikipedia.org/wiki/Phoenix_pay_system)

> In June 2011, IBM won the contract to set up the system, using PeopleSoft
> software; the original contract was for $5.7 million, but IBM was eventually
> paid $185 million.

...that's 32x the original price.

Everyone in software knows exactly how IBM and Oracle make their money. That
part's not a mystery. The bigger mystery to me is why these governments and
big companies keep spending money on these professional leeches and expecting
a different result.

Do other gov contractors charge 32x the original budget? Do construction, or
ad companies, or accountants? Or is it just software?

~~~
entee
Defense contractors, construction occasionally. It's pretty nuts. The east
span of the bay bridge was something like 5x the original cost estimate. I
think some of this ends up being because of the same reasons that home general
contractors end up charging far more than the estimate: modifications cost
extra. "Oh you wanted this feature? It wasn't in the contract, we can do it
but that'll be $X. Oh you need to include this other system? That's out of
scope but for $Y we can solve it." Million here, a million there and pretty
soon you're talking real money ;)

[https://www.wnyc.org/story/316201-brief-
history-64-billion-b...](https://www.wnyc.org/story/316201-brief-
history-64-billion-bay-bridge/)

------
chasd00
I remember when Oracle bought Sun and the OpenSolaris guys didn't quite fit
in.

"don't make the mistake of anthropomorphising Larry Ellison" \- Bryan Cantrell

skip to 38:20
[https://www.youtube.com/watch?v=-zRN7XLCRhc](https://www.youtube.com/watch?v=-zRN7XLCRhc)

~~~
kakwa_
Just yesterday I came across one of his other videos, and I guess Bryan
Cantrill still as a bit of grudge against Oracle:

Light ranting:
[http://www.youtube.com/watch?v=Pm8P4oCIY3g&t=10m10s](http://www.youtube.com/watch?v=Pm8P4oCIY3g&t=10m10s)

A bit heavier ranting (with the fallout after his usenix ranting):
[http://www.youtube.com/watch?v=Pm8P4oCIY3g&t=14m21s](http://www.youtube.com/watch?v=Pm8P4oCIY3g&t=14m21s)

Selected quote: "Any explanation of Oracle that doesn't end with a nazi
allegory does not fully explain Oracle"

Bryan Cantrill is really fun to listen to, is a tech veteran now, and is still
as passionate and energetic as he was the first day (Another interesting video
about programming languages he experienced during his (long by tech standards)
career:
[https://www.youtube.com/watch?v=LjFM8vw3pbU](https://www.youtube.com/watch?v=LjFM8vw3pbU))

------
tim333
>[interviwer] What two industries are the first you should learn when
developing your circle of competence?

>[Buffett] Look for simple businesses. If I gave you $10M to invest right now
and you only had three weeks to spend it and you could only spend it in Omaha,
you’d look for simple, understandable, strong businesses. You look at the
Nebraska Furniture Mart (NFM). You wouldn’t look at the third best fast food
chain. You might look at McDonald’s, because it is number one and will
probably always been number one. They have share of mind. What about Oracle?
Too hard. GM? Too hard. You can’t predict the future for these two companies.
Too many variables.

That was 2009. Looks like he's decided that was still the case.

Also going by the top comment in
[https://news.ycombinator.com/item?id=19289583](https://news.ycombinator.com/item?id=19289583)
three days ago:

... "I probably met nearly 100 developers, and when I asked all of them what
they use Oracle for EVERY SINGLE ONE OF THEM openly told me that their
companies use Oracle right now but they hate it and they were all in the
process of transitioning to other providers or open source solutions."...

I'd guess shorting Oracle might be more the thing to do. Typically customer
reaction proceeds the financial numbers moving.

------
dec0dedab0de
In this day and age if I owned a company, and some Director or VP suggested
using anything from Oracle or HP, I would assume they were getting some kind
of fringe benefit from the sales person and fire them immediately.

------
quelsolaar
Warren Buffet doesn't understand that you shouldn't anthropomorphize the
lawnmower.

[https://youtu.be/-zRN7XLCRhc?t=1983](https://youtu.be/-zRN7XLCRhc?t=1983)

~~~
teddyh
Quote is at
[https://www.youtube.com/watch?v=-zRN7XLCRhc#t=38m25s](https://www.youtube.com/watch?v=-zRN7XLCRhc#t=38m25s)

------
nateburke
MongoDB would be a great acquisition target for Oracle. Their recent
acquisition of mLab along with their Atlas offering could create a nice
headline to help boost the perception that Oracle is actively moving its
database business to the cloud.

Mongo trades at a premium, but its market cap is in the single-digit billions
& is nothing Oracle couldn't afford right now. Plus, Oracle's massive legal
machine could move the licensing innovation needle even further in the
direction of Mongo's recent move to SSPL.

Disclaimer: I work for Salesforce

~~~
dragonwriter
> Plus, Oracle's massive legal machine could move the licensing innovation
> needle even further in the direction of Mongo's recent move to SSPL.

Proprietary licensing that has a veneer of openness isn't a legal innovation
issue, it's a PR innovation issue (how to get the goodwill and community
support that comes with open source while using proprietary licensing that
doesn't provide the freedom of open source.) Oracle doesn't have any
particular special PR competence when it comes to targeting the audience for
whom open source is a big draw, and seems quite happy locking anything that
they don't want to share with the community behind traditional proprietary
licensing, so I wouldn't see the SSPL game and Oracle having a lot to offer
each other. SSPL is for people who want to be like Oracle but pretend they
aren't, and even if Oracle cared about the pretense, there's not a lot of
indication that the SSPL approach works.

------
eeeeeeeeeeeee
Seems pretty obvious — Oracle isn’t disclosing specific cloud data in their
financials because the data would be embarrassing.

------
blairanderson
Have you read his shareholder letters? To be fair, Buffett doesn't understand
anything cloud or computer related.

~~~
nabla9
Often used Buffet quotes: "If you don't know jewelry, know your jeweler". I
suspect that Larry Ellison is factor in the decision to drop Oracle.

------
ckozlowski
I could help explain it for him.

Take something like RAC.

Call it "Cloud On-premises."

Viola! Cloud sales are up.

------
stevespang
The SEC dogs Elon Musk but doesn't dare lock horns with Larry Ellison, the
pathological corporate sociopath whose company locks users into seemingly
never ending software leases with threatened audits and whose corp has teams
of lawyers and only offers "limited breakdowns in its financial disclosures" .
. .

Larry recently bragged how even Amazon is under his cloak using Oracle because
there is nothing out there better. Bezos response: We'll build our own
database no matter what the cost and then we'll compete against you signing up
what were your customers. How do you like that Larry ?

~~~
bufferoverflow
Amazon has developed Aurora and DynamoDB.

And they are free to use any of the open source ones.

Your narrative makes little sense.

~~~
ceejayoz
Ellison claims ([https://www.zdnet.com/article/amazons-consumer-business-
move...](https://www.zdnet.com/article/amazons-consumer-business-moves-from-
oracle-to-aws-but-larry-ellisons-wont-stop-talking/)) Aurora is Oracle's
because it's MySQL based:

> So this is another claim I'm going to make, Aurora, not built by Amazon,
> built by us, called MySQL. Amazon just gave it a new name. It's also true of
> Redshift. Amazon didn't build Redshift, that's not what they do. These are
> -- they just open-sourced pieces where they built -- that they used to build
> their cloud. They did a great job. They did a great job of making those
> pieces available in a coherent -- deliver them in a coherent cloud. I give
> them a lot of credit. But they don't build databases. Amazon still runs all
> of their -- all of Amazon on Oracle Database. They are trying, they promised
> because they don't like me reminding them of that publicly. They said
> they're trying to get off Oracle by 2020.

> Aurora is our other database. It's our low-end database. It's our database.
> It's not theirs. Well, it's open source. Anyone can use it for nothing.

(This is bullshit, of course.)

